Dinesh bhai
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
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. 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
84,500 $
35,000
ACB
42,000 $
80,000
18,000
5,000
52,800
12,000
$ 142,500
$ 186,800
Inventory
Office furniture
Computer hardware
Computer software
Inventory
Office furniture
Computer hardware
Computer 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 the
assets.
FMV
84,500 $
35,000
18,000
5,000
$ 142,500
$
$
ACB
0
27,500
16,500
0
42,000
80,000 $
52,800
12,000
186,800 $
44,000
UCC
0
27,500
16,500
0
44,000
Elected
amount
Cash
Preferred
Shares](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fea69969c-51e7-4ee2-9b9d-b748998235ab%2F8a6f363c-75fe-4388-8f4a-c63097609410%2Fm5rbu5b_processed.jpeg&w=3840&q=75)
Transcribed Image Text: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
84,500 $
35,000
ACB
42,000 $
80,000
18,000
5,000
52,800
12,000
$ 142,500
$ 186,800
Inventory
Office furniture
Computer hardware
Computer software
Inventory
Office furniture
Computer hardware
Computer 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 the
assets.
FMV
84,500 $
35,000
18,000
5,000
$ 142,500
$
$
ACB
0
27,500
16,500
0
42,000
80,000 $
52,800
12,000
186,800 $
44,000
UCC
0
27,500
16,500
0
44,000
Elected
amount
Cash
Preferred
Shares
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