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:

Air Power Steering

A type of power steering system that uses compressed air to reduce the force needed to steer the vehicle, enhancing maneuverability.

Manual Steering Systems

Steering mechanisms operated without hydraulic or electric assistance, relying entirely on the physical effort of the driver.

Retrofit

The addition of new technology or features to older systems or vehicles, upgrading their capabilities or performance.

Power Steering Analyzer

A specialty tool for testing steering system hydraulics consisting of hoses, quick-release couplers, a flowmeter, pressure gauge, and flow control valve.