It is now April 2012 and your client, Mrs. K, has come to you for tax advice. Mrs. K is 60 years old, is married and has children. Mrs. K’s children are 31 and 35 years old. Mrs. K owns all of the shares of Kit Inc. Mrs. K thinks that Kit Inc. will increase in value over the next several years. Additional details about Kit Inc. are provided in Exhibit 1. Mrs. K is in the process of planning for her retirement and eventual death and she has provided additional details about her estate planning in Exhibit 2. Required: answer the following questions. Show detailed calculations and explain your answers. You must give specific Income Tax Act (ITA) section, subsection and paragraph (where applicable) references in order to support your answer to question 1. Don’t just list multiple ITA references. (ITA references are not needed for question 2). Note: you can ignore any changes (if applicable) announced in the March 2012 Federal and/or Ontario budget(s).Questions:1) (50.5 marks available) Mrs. K wants to transfer the future growth of Kit Inc. to her children now without paying any tax. Explain how this can be done, while meeting her needs (which are discussed further below) by:(a) using a new (Holding) company, using subsection 85(1) of the Act, receiving the maximum amount of boot and preferred shares for the balance of consideration; and,(b) without using a new company, using section 86 of the Act, receiving preferred shares as consideration and not taking any boot. Make sure you describe the income tax consequences to Mrs. K in (a) and (b) above and to the new (Holding) company in (a) above.2) (10 marks available) Compute Kit Inc.’s general rate income pool (GRIP) account balance as of December 31, 2011. Note: you will lose 1 mark for each incorrect addition/subtraction.