Your very wealthy client, Ms. Nell Tosh is holding investments in a number of small venture capital companies. In order to diversify her holdings, she has decided to sell two of her many investments in 2018 and use the proceeds to invest in companies in different industries.

Her first sale, in January, involves Tech Ltd., a company she acquired 4 years ago for $3,500,000. Her common shares are sold for $4,200,000. Of the proceeds, $3,800,000 is immediately invested in Small Oil Inc. common shares. The remainder of the funds are used to purchase preferred shares in Small Bank Inc. All three corporations are eligible small business corporations.

The second sale, in October, involves Future Inc. common shares and results in proceeds of $5,600,000. This company is an eligible small business corporation and was acquired 6 years ago at a cost of $3,800,000. The proceeds are invested in November in common shares of the following companies:

Sombra Inc. (An Eligible Small Business Corporation) $2,400,000

Ziff Ltd. (An Eligible Small Business Corporation) 2,800,000

BCE (A Canadian Public Company) 400,000

In December, Ms. Tosh is approached by her brother, Niels, a brilliant biochemist. He is planning to start a new company which will be an eligible small business corporation. Niels would like her to invest $1,000,000 in his companys common shares. The company will sell his revolutionary new weight loss pill.

At a February 20, 2019 meeting Ms. Tosh informs you that she has not invested in any shares since November. She would like to minimize her tax liability in any way legally possible.

Required: Determine the tax consequences for Ms. Tosh of the two sales of shares and the adjusted cost base of each of her new investments assuming she does not invest in any other eligible small business corporations. What advice would you give Ms. Tosh regarding an investment in her brothers company?