A parent transfers their common shares in their business to non-participating fixed value preferred shares, and common shares in the business are issued to the parent's child who is taking over the operations of the company.This is an example of which of the following?
A)A measure to reduce the tax impact on the growth of the child's shares
B)An estate freeze
C)Income splitting
D)A specified investment flow-through

Question

Quizplus · Accepted Answer

This is an example of an estate freeze, where the parent has transferred their common shares to non-participating fixed value preferred shares to "freeze" the value of their shares for estate planning purposes. The issuance of common shares to the child allows them to take over the operations of the company without inheriting the potentially high tax liability of the parent's common shares.

A Parent Transfers Their Common Shares in Their Business to Non-Participating