Santa/Scott (Tim Allen) tricks Jack Frost (Martin Short) into the Santa Clause just like Jack did to Scott. They get transported back in time and everything is put back to the way it was. What seemed like 12 years to them was actually a few minutes to the in-laws and Mrs. Clause who are at the North Pole/Canada. Santa reveals the toy factory to the in-laws as secrets aren’t for families.
Everyone is happy.