Michael Chan purchased 100% of the issued shares of Quality Rest Inc., a Canadian-controlled private corporation, which owns and operates an assisted-living retirement home in Ontario. Quality Rest has a December 31 fiscal year end. The transaction closed on October 1, 2023. At that time, the values of certain assets owned by Quality Rest were as follows. Land Building Furniture and fixtures Computer equipment Inventory Marketable securities Incorporation/organization costs. January 2022 December 31, 2022 January 1, 2023 October 1, 2023 January 1, 2024 UCC Cost $145,200 N/A 280,000 108,900 100,000 78,700 14,500 7,300 66,600 29,000 12,100 September 30, 2023 December 31, 2023 December 31, 2024 N/A N/A 1,200 FMV $300,000 Business Income (loss) $(100,000) (242,000) (70,000) 40,000 350,900 60,500 Michael selected December 31, 2023 as the first fiscal year-end for Quality Rest after the acquisition. The following is a schedule of Quality Rest's income and unused losses for the period January 1, 2022-December 31, 2024. 9,700 62,900 12, 100 500 Taxable Capital gain $ Nil Nil Nil 10,000 Net capital loss (22,000) Nil Nil Nil Required: Assuming Quality Rest does not make an election to recognize accrued gains or recapture under paragraph 111(4)(e) of the Income Tax Act:
Michael Chan purchased 100% of the issued shares of Quality Rest Inc., a Canadian-controlled private corporation, which owns and operates an assisted-living retirement home in Ontario. Quality Rest has a December 31 fiscal year end. The transaction closed on October 1, 2023. At that time, the values of certain assets owned by Quality Rest were as follows. Land Building Furniture and fixtures Computer equipment Inventory Marketable securities Incorporation/organization costs. January 2022 December 31, 2022 January 1, 2023 October 1, 2023 January 1, 2024 UCC Cost $145,200 N/A 280,000 108,900 100,000 78,700 14,500 7,300 66,600 29,000 12,100 September 30, 2023 December 31, 2023 December 31, 2024 N/A N/A 1,200 FMV $300,000 Business Income (loss) $(100,000) (242,000) (70,000) 40,000 350,900 60,500 Michael selected December 31, 2023 as the first fiscal year-end for Quality Rest after the acquisition. The following is a schedule of Quality Rest's income and unused losses for the period January 1, 2022-December 31, 2024. 9,700 62,900 12, 100 500 Taxable Capital gain $ Nil Nil Nil 10,000 Net capital loss (22,000) Nil Nil Nil Required: Assuming Quality Rest does not make an election to recognize accrued gains or recapture under paragraph 111(4)(e) of the Income Tax Act:
Chapter20: Corporations And Parterships
Section: Chapter Questions
Problem 17DQ
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Transcribed Image Text:Ignore your previous choice(s) and assume that an election can and will be made on land. At what amount of elected proceeds will
Michael be able to utilize all expiring losses?
Transcribed Image Text:Michael Chan purchased 100% of the issued shares of Quality Rest Inc., a Canadian-controlled private corporation, which owns and
operates an assisted-living retirement home in Ontario. Quality Rest has a December 31 fiscal year end. The transaction closed on
October 1, 2023. At that time, the values of certain assets owned by Quality Rest were as follows.
Land
Building
Furniture and fixtures
Computer equipment
Inventory
Marketable securities
Incorporation/organization costs
January 2022 December 31, 2022
January 1, 2023
October 1, 2023
January 1, 2024
UCC
Cost
$145,200
N/A
280,000 108,900
100,000
78,700
7,300
September 30, 2023
December 31, 2023
December 31, 2024
14,500
66,600
29,000
12,100
N/A
N/A
1,200
Michael selected December 31, 2023 as the first fiscal year-end for Quality Rest after the acquisition. The following is a schedule of
Quality Rest's income and unused losses for the period January 1, 2022-December 31, 2024.
FMV
$300,000
350,900
Business
Income
(loss)
$(100,000)
(242,000)
(70,000)
40,000
60,500
9,700
62,900
12,100
500
Taxable
Capital
gain
$ Nil
Nil
Nil
10,000
Net
capital
loss
(22,000)
Nil
Nil
Nil
Required:
Assuming Quality Rest does not make an election to recognize accrued gains or recapture under paragraph 111(4)(e) of the Income Tax
Act:
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