Dinesh bhai Tia Kline, a resident of Canada, is the sole shareholder of KI Inc. She plans to transfer four assets, which she owns, to KI Inc. inexchange for cash and preferred shares of KI Inc. She wishes to receive the maximum amount in cash that she can receive and stilldefer the recognition of income for tax purposes on the transfer of the assets. Tia and KI Inc. will jointly make a Section 85 election foreach of the assets. The following chart outlines the details of the assets.UCCFMV84,500 $35,000ACB42,000 $80,00018,0005,00052,80012,000$ 142,500$ 186,800InventoryOffice furnitureComputer hardwareComputer softwareInventoryOffice furnitureComputer hardwareComputer software$$Required:For each of the four assets individually, state the amount that should be elected as proceeds under Section 85 of the Income Tax Act,state the amount of cash consideration, and state the value of the preferred shares Ms. Kline should accept as consideration for theassets.FMV84,500 $35,00018,0005,000$ 142,500$$ACB027,50016,500042,00080,000 $52,80012,000186,800 $44,000UCC027,50016,500044,000ElectedamountCashPreferredShares

Section 85 of the Income Tax Act of Canada allows the tax-deferred transfer of assets between a…

Answered: Dinesh bhai

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter14: Choice Of Business Entity—operations And Distributions

Section: Chapter Questions

Problem 56P

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Tia Kline, a resident of Canada, is the sole shareholder of KI Inc. She plans to transfer four assets, which she owns, to Kl Inc. in exchange for cash and preferred shares of KI Inc. She wishes to receive the maximum amount in cash that she can receive and still defer the recognition of income for tax purposes on the transfer of the assets. Tia and KI Inc. will jointly make a Section 85 election for each of the assets. The following chart outlines the details of the assets. Inventory Automobile Patent Customer list FMV ACB UCC $ 260,000 $ 22,500 52,000 $ 30,000 50,000 100,000 60,000 16,500 30,000 Required: $432,500 $ 142,000 $ 46,500 For each of the four assets individually, state the amount that should be elected as proceeds under Section 85 of the Income Tax Act, state the amount of cash consideration, and state the value of the preferred shares Ms. Kline should accept as consideration for the assets. FMV ACB UCC Elected amount Cash Preferred Shares Inventory $ 260,000 $ 52,000 0…
Tia Kline, a resident of Canada, is the sole shareholder of KI Inc. She plans to transfer four assets, which she owns, to KI Inc. in exchange for cash and preferred shares of KI Inc. She wishes to receive the maximum amount in cash that she can receive and still defer the recognition of income for tax purposes on the transfer of the assets. Tia and KI Inc. will jointly make a Section 85 election for each of the assets. The following chart outlines the details of the assets. UCC FMV $ 260,000 $ 22,500 50,000 100,000 ACB 52,000 30,000 60,000 0 $ 432,500 $ 142,000 $ Inventory Automobile Patent Customer list Inventory Automobile Patent Customer list $ Required: For each of the four assets individually, state the amount that should be elected as proceeds under Section 85 of the Income Tax Act, state the amount of cash consideration, and state the value of the preferred shares Ms. Kline should accept as consideration for the assets. $ FMV 260,000 $ 22,500 50,000 100,000 432,500 $ ACB $…
Amy and Mitchell share equally in the profits, losses, and capital of the accrual basis AM Products LLC. The LLC does not need to report financial information to any third parties, so capital accounts are determined using tax rules (rather than GAAP). Amy is a managing member of the LLC (treated as a general partner) and is a U.S. person. At the beginning of the current tax year, Amy's capital account has a balance of $692,000, and the LLC has debts of $449,800 payable to unrelated parties. The debts are recourse to the LLC, but neither of the LLC members has personally guaranteed them. Assume that all LLC debt is shared equally between the partners. The following information about AM's operations for the current year is obtained from the LLC's records. Operating income* $1,038,000 W-2 wages 200,000 Depreciation expense 300,000 Interest income 10,380 Long-term capital loss 6,920 Long-term capital gain 20,760 Charitable contribution (cash) 10,430 Cash distribution…
a. What amount of gain or loss does Zhang recognize on the transfer of the property to her corporation? b. What is Zhang’s tax basis in the stock she receives in the exchange?
Joe and Sunny intend to enter into a business venture together and decided that a corporation would be a desirable entity choice for federal income tax purposes. The corporation is named JS Inc. (“JS”). For newly established JS, Joe intends to contribute Property A with a fair market value (“FMV”) of $800 and basis of $300, subject to debt of $200. Sunny intends to contribute cash of $800. JS is elected to be treated as an S corporation for federal income tax purposes. 1. Provide Joe’s basis in JS upon contribution (i.e., Year 0) of Property A. 2. Provide Sunny’s basis in JS upon contribution (i.e., Year 0) of cash. 3. Provide JS’s basis in Property A and cash immediately after the contribution. 4. Assuming Joe’s and Sunny’s basis in the JS stock remain the same after the contributions for Year 1, determine Joe’s and Sunny’s basis when JS distributes $400 of cash to Joe and Sunny. 5. Assume the following: 1) there are no AAA, OAA, and AEP; 2) the debt of $200 is still treated as a loan…
Mackenzie is considering conducting her business, Mac561, as either a single member LLC or as an S corporation. Determine Mackenzie’s after-tax cash flow from the entity’s business income and any compensation she receives from the business assuming her marginal ordinary income tax rate is 37 percent, her marginal FICA rate on employee compensation is 1.45 percent, her marginal self-employment tax rate is 2.9 percent, and any employee compensation or self-employment income she receives is subject to the 0.9 percent additional Medicare tax. Finally, Mac561 generated $200,000 of business income before considering the deduction for compensation Mac561 pays to Mackenzie and Mackenzie can claim the full qualified business income deduction on Mac561’s business income. (Round your intermediate computations to the nearest whole dollar amount.) a. Mackenzie conducted Mac561 as a single-member LLC. A). After-tax cash flow $_________________
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Jan is the sole shareholder of Jan Ltd. Summer is the sole shareholder of SKY Co. Both of the companies are CCPCs. Jan and Summer will amalgamate their corporations as per Section 87(1) on July 21st, forming JS Ltd. Jan's shares in Jan Ltd. have an ACB of $1,000 and a fair market value of $24,500. Summer's shares in SKY Co. have an ACB of $1,500 and a fair market value of $45,500. Which of the following will apply with respect to the planned amalgamation? Multiple Choice The ACB of Jan's and Summer's shares in JS Ltd. will be $24,500 and $45,500, respectively. JS Ltd.'s first taxation year will commence on July 22nd
Bridget transferred a piece of land she held personally to her wholly owned corporation using the provisions of ITA 85. The land had an adjusted cost base of $150,000 and a fair market value of $250,000 at the time of transfer. The property was mortgaged for $50,000. As consideration for the transfer, Bridget received cash of $200,000 and preferred shares with a legal stated capital of $10,000. The corporation assumed the mortgage. Which one of the following is the elected transfer price (first) and the adjusted cost base of the preferred shares (second)? a. $150,000 and Nil b. $250,000 and $240,000 c. $250,000 and Nil d. $260,000 and $50,000 Clear my choice
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Linda, a resident of Canada, owns 100 % of the common shares of both Windsor Retail Ltd. (“WRL”) and Yellowknife Klosets Ltd. (“YKL”). Both corporations have a August 31 year- end. “YKL” had BOTH active business income AND taxable income of $ 24,000 for its 2020 taxation year. Barbara has decided to allocate to “YKL” as much of the small business limit as is needed to maximize the small business deduction for “YKL”, with the remaining balance of the available annual business limit allocation being made to “WRL”. Most but not all of “WRL” ’s income is from an active business carried on in Canada. The following information pertains to “WRL” for its 2020 taxation year: Division B net income for tax purposes $ 210,000• Net taxable capital gains 12,000• Charitable donation contributions 5,000 ? Dividends from taxable Canadian corporations 18,000 The small business deduction for “WRL” for 2020 should be: $ 39,900 $ 35,530 $ 34,200 $ 37,620 None of the above
Hello, please help me with the following question. Kim is an employee of Azure Corporation. In the current year, she receives a cash salary of $30,000 and also is given 10 shares of Azure stock for services she renders to the corporation. The shares in Azure Corporation are worth $1,000 each. a. How will the transfer of the 10 shares to Kim be handled for tax purposes? b. Kim's basis in the stock is $. c. What is Azure Corporation's total compensation deduction for Kim's services?$

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