u/Objective-Raccoon-12

Hard to find anything online about this, so here it goes, I'm trying to figure out the tax implications to the buyer and seller in a scenario where:

1. Seller of CCPC corporation sold their common shares to step kids for 1M, the step kids are taking over the business
2. From the 1M, 0.7M is in promissory notes with remainder in cash
3. LCGE of 1M claimed by seller for the share sale
4. 5 years later, the 0.7M promissory notes are gifted back to the same corporation that issued the preferred shares

How would the 0.7M gifted notes be treated from a tax perspective by the original seller and the corporation that receives them in 5 years?

Edit: changed preferred shares to promissory notes