Craig owns a piece of land that he'd like to use in a new business. He will transfer the land into a newly formed corporation using Section 85. The land has an ACB of $2,000 and a FMV of $11,000. If he takes back a note payable equal to $5,000 on the exchange, and the remaining consideration as shares of the corporation, which of these options includes at least part of the tax consequences? The shares will have an ACB of $0 and a FMV of $11,000 $3,000 capital gain will result $3,000 deemed dividend The shares will have an ACB of $2,000 and a FMV of $8,000

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question
Craig owns a piece of land that he'd like to use in a new business. He will transfer the land into a
newly formed corporation using Section 85. The land has an ACB of $2,000 and a FMV of $11,000. If
he takes back a note payable equal to $5,000 on the exchange, and the remaining consideration as
shares of the corporation, which of these options includes at least part of the tax consequences?
The shares will have an ACB of $0 and a FMV of $11,000
$3,000 capital gain will result
$3,000 deemed dividend
The shares will have an ACB of $2,000 and a FMV of $8,000
Transcribed Image Text:Craig owns a piece of land that he'd like to use in a new business. He will transfer the land into a newly formed corporation using Section 85. The land has an ACB of $2,000 and a FMV of $11,000. If he takes back a note payable equal to $5,000 on the exchange, and the remaining consideration as shares of the corporation, which of these options includes at least part of the tax consequences? The shares will have an ACB of $0 and a FMV of $11,000 $3,000 capital gain will result $3,000 deemed dividend The shares will have an ACB of $2,000 and a FMV of $8,000
Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Reasons for Estate Planning
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education