Derek has shares of UltFrisCorp that he would like to transfer, using Section 85, to a holding companythat he has recently setup. The ACB and PUC of his UltFrisCorp shares are $30,000. The fair marketvalue of the shares are $1 million. Derek also has $450,000 in his lifetime capital gains exemptionthat he would like to use as part of this transfer.What is the elected amount that Derek should chose in order to use his lifetime capital gainsexemption, and avoid paying tax on the transfer.1,000,00030,000480,000450,000

Section 85 of the Income Tax Act allows for the tax-deferred transfer of property between a taxpayer…

Answered: Derek has shares of UltFrisCorp that he…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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In the current year, Tom , Jay , and Dana form Ares Corporation. Tom contributes land (a capital asset) having a $62,500 FMV (fair market value) in exchange for 165 shares of stock. He purchased the land three years ago for $65,000. Jay contributes machinery (Sec. 1231 property purchased four years ago) having a $115,000 adjusted basis and a $37,500 FMV in exchange for 105 shares of Ares stock. Dana contributes services worth $25,000 in exchange for 60 shares of Ares stock.

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