The Following Scenarios Represent Aspects Within Various Tax Planning Tools

question 5

Essay

The following scenarios represent aspects within various tax planning tools, (each dependent on specific conditions being met).
1. A corporation purchases the shares of another corporation in exchange for shares issued by the purchaser, and the vendors may report the sale at their tax costs. This is a useful method for public corporations with many shareholders.
2. Shares of two or more corporations are exchanged for shares of a new entity, and all of the assets of the corporations are transferred to the new entity.
3. In a tax-deferred sale of a business, a shareholder's common shares are converted to fixed-value preferred shares, and new common shares are then issued to the purchaser, often at a nominal value.
4. Assets are sold from a vendor corporation to a buyer corporation at an elected value ranging from the tax cost (i.e. UCC or ACB) to FMV, in exchange for shares and a non-share payment not exceeding the elected value.
Tax-planning tools:
_______ Section 85 rollover
_______ Section 85.1 share-for-share exchange
_______ Section 86 share reorganization
_______ Section 87 amalgamation
Required:
Match each of the four scenarios with the appropriate tax-planning tool from the list. Use each answer only once.

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Definitions:

Forecasted Market Return

An estimation of the future returns that will be generated by the market over a specific period.

T-Bill Rate

The yield or interest rate paid to investors in U.S. Treasury bills, often seen as a benchmark for short-term interest rates.

Adjusted Beta

A measurement that accounts for potential changes in the volatility or risk of a stock's returns, used to better predict future performance by adjusting historical beta values.

Single Index Model

A simplified methodology to estimate the returns of a security or portfolio using the performance of a single market index to explain the returns.