The Shareholders of Parent Co

question 5

Essay

The shareholders of Parent Co. and Sub Co. wish to combine the business activities of the two companies through a business combination. Both companies have assets that have appreciated in value above their capital cost. Parent Co. owns 85% of the shares of Sub Co.
Required:
Suggest a business combination (amalgamation or wind-up) that would defer the tax consequences associated with the increased value of the assets, and explain why you did not choose the other option.

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Definitions:

Cytoplasm

The jelly-like material within a cell, excluding the nucleus, containing organelles and involved in cellular processes.

Chromosomes

Chromosomes are long, thread-like structures made of DNA and proteins, contained in the nucleus of cells, which carry genetic information.

Mitochondria

Mitochondria are organelles within cells that produce energy through the process of oxidative phosphorylation, often referred to as the "powerhouses" of the cell.

Zona Pellucida

The thick, transparent outer layer surrounding an egg cell or oocyte, involved in sperm binding and fertilization.