Valerie owns all of the common shares of V-Ltd. The shares have an ACB and PUC of $10,000 and are worth $800,000.

Valerie would like to departure from the business gradually over number of years and transfer the business to her Son, Paul. However, Paul doesn't have the financial capacity to buy Valerie's shares at the moment.Therefore, Valarie decided to take the cash available ($100,000) from the Corporation and make anEstate-Freezefor the remainder of the amount.

In the course of a reorganization of capital, Valerie exchanges all of her common shares for $700,000 of redeemable preferred shares of V-Ltd and $100,000 of cash payment.

Determine the tax implications for Valerie.

Refer to Canadian Tax