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:

Business Transaction

Any activity that involves the exchange of goods, services, or funds between two or more parties.

QuickBooks Company

A specific business entity set up within QuickBooks accounting software to manage its financial transactions and records.

Onscreen Journal

A digital ledger displayed on a screen, used to record financial transactions in accounting software.

Onscreen Forms

Digital forms displayed on a screen, allowing users to enter and submit information electronically.