Hagrid Inc. is subject to an acquisition of control (AOC) on January 1, 2023. The company has a business loss of $65,000 in its 2022 taxation year prior to the AOC, which cannot be carried back. On December 31, 2022, the company had two capital properties, land with an ACB of $150,000 and FMV of $65,000; and a depreciable property with a capital cost and ACB of $100,000, a UCC of $75,000 and a FMV of $200,000. Assuming Hagrid will continue in business and will return to profitability in 2023, what write downs and elections are available to Hagrid Inc. in order to optimize the amount of 2022 non-capital losses carried forward to the 2023 taxation year? Hagrid Inc. should elect to recognize the allowable capital loss of $42,500 on the land at the end of 2022. A capital gain on the depreciable property would be realized equal to $50,000 and there would be recapture of $25,000. Hagrid Inc. should elect to recognize the allowable capital loss of $42,500 on the land at the end of 2022. A deemed disposition of the depreciable property should be elected at an amount of $100,000, resulting in recapture of $25,000. Haged Inc. will be required to write the land down to its FMV and recognize the allowable capital loss of $42,500 at the end of 2022. No elections are available to the company. Hagrid Inc. will be required to write the land down to its FMV and recognize the allowable capital loss of $42,500 at the end of 2022. A deemed disposition of the depreciable property should be elected at a amount of $185,000, resulting in
Hagrid Inc. is subject to an acquisition of control (AOC) on January 1, 2023. The company has a business loss of $65,000 in its 2022 taxation year prior to the AOC, which cannot be carried back. On December 31, 2022, the company had two capital properties, land with an ACB of $150,000 and FMV of $65,000; and a depreciable property with a capital cost and ACB of $100,000, a UCC of $75,000 and a FMV of $200,000. Assuming Hagrid will continue in business and will return to profitability in 2023, what write downs and elections are available to Hagrid Inc. in order to optimize the amount of 2022 non-capital losses carried forward to the 2023 taxation year? Hagrid Inc. should elect to recognize the allowable capital loss of $42,500 on the land at the end of 2022. A capital gain on the depreciable property would be realized equal to $50,000 and there would be recapture of $25,000. Hagrid Inc. should elect to recognize the allowable capital loss of $42,500 on the land at the end of 2022. A deemed disposition of the depreciable property should be elected at an amount of $100,000, resulting in recapture of $25,000. Haged Inc. will be required to write the land down to its FMV and recognize the allowable capital loss of $42,500 at the end of 2022. No elections are available to the company. Hagrid Inc. will be required to write the land down to its FMV and recognize the allowable capital loss of $42,500 at the end of 2022. A deemed disposition of the depreciable property should be elected at a amount of $185,000, resulting in
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Hagrid Inc. is subject to an acquisition of control (AOC) on January 1, 2023. The
company has a business loss of $65,000 in its 2022 taxation year prior to the AOC,
which cannot be carried back. On December 31, 2022, the company had two capital
properties, land with an ACB of $150,000 and FMV of $65,000; and a depreciable
property with a capital cost and ACB of $100,000, a UCC of $75,000 and a FMV of
$200,000. Assuming Hagrid will continue in business and will return to profitability
in 2023, what write downs and elections are available to Hagrid Inc. in order to
optimize the amount of 2022 non-capital losses carried forward to the 2023 taxation
year?
Hagrid Inc. should elect to recognize the allowable capital loss of $42,500 on the
land at the end of 2022. A capital gain on the depreciable property would be
realized equal to $50,000 and there would be recapture of $25,000.
Hagrid Inc. should elect to recognize the allowable capital loss of $42,500 on the
land at the end of 2022. A deemed disposition of the depreciable property
should be elected at an amount of $100,000, resulting in recapture of $25,000.
Hagid Inc. will be required to write the land down to its FMV and recognize the
allowable capital loss of $42,500 at the end of 2022. No elections are available
to the company.
Hagrid Inc. will be required to write the land down to its FMV and recognize the
allowable capital loss of $42,500 at the end of 2022. A deemed disposition of
the depreciable property should be elected at a amount of $185,000, resulting in
recapture of $25,000 and a taxable capital gain of $42,500.
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