A shareholder sells public securities to a corporation, and files a section 85 election to have a transfer/sale price of $60,000. The fair market value (FMV) and adjusted cost base (ACB) of the securities are $220,000 and $60,000 respectively. As consideration for the transfer, the corporation issues a $50,000 note, preference shares worth $150,000 and common shares worth $20,000. What are the tax costs of the various assets to the shareholder? The note - $50,000, the preference shares - $nil, and the common shares $10,000. The note - $50,000, the preference shares - $132,353 ($150,000/$170,000 total share value issued), and the common shares $37,647 ($2,000/$170,000 total share value issued). The note - $60,000, the preference shares - $150,000, and the common shares $10,000. The note - $50,000, the preference shares - $10,000, and the common shares $nil.
A shareholder sells public securities to a corporation, and files a section 85 election to have a transfer/sale price of $60,000. The fair market value (FMV) and adjusted cost base (ACB) of the securities are $220,000 and $60,000 respectively. As consideration for the transfer, the corporation issues a $50,000 note, preference shares worth $150,000 and common shares worth $20,000. What are the tax costs of the various assets to the shareholder? The note - $50,000, the preference shares - $nil, and the common shares $10,000. The note - $50,000, the preference shares - $132,353 ($150,000/$170,000 total share value issued), and the common shares $37,647 ($2,000/$170,000 total share value issued). The note - $60,000, the preference shares - $150,000, and the common shares $10,000. The note - $50,000, the preference shares - $10,000, and the common shares $nil.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A shareholder sells public securities to a corporation, and files a section 85 election to have a transfer/sale price of $60,000. The fair market value (FMV) and adjusted cost base (ACB) of the securities are $220,000 and $60,000 respectively. As consideration for the transfer, the corporation issues a $50,000 note, preference shares worth $150,000 and common shares worth $20,000. What are the tax costs of the various assets to the shareholder?
The note - $50,000, the preference shares - $nil, and the common shares $10,000.
The note - $50,000, the preference shares - $132,353 ($150,000/$170,000 total share value issued), and the common shares $37,647 ($2,000/$170,000 total share value issued).
The note - $60,000, the preference shares - $150,000, and the common shares $10,000.
The note - $50,000, the preference shares - $10,000, and the common shares $nil.
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