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, 2022. 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 2021 - December 31, 2021 January 1, 2022 October 1, 2022 January 1, 2023 Cost $145,200 280,000 100,000 September 30, 2022 December 31, 2022 December 31, 2023 14,500 66,600 29,000 12,100 UCC N/A 108,900 78,700 7,300 N/A N/A 1,200 Michael selected December 31, 2022 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, 2021 through December 31, 2023. Business Income (loss) $(100,000) FMV $300,000 350,900 60,500 9,700 (242,000) (70,000) 40,000 62,900 12,100 500 Taxable Capital gain $ Nil Nil Nil 10,000 Net capital loss (22,000) Nil Nil Nil
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, 2022. 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 2021 - December 31, 2021 January 1, 2022 October 1, 2022 January 1, 2023 Cost $145,200 280,000 100,000 September 30, 2022 December 31, 2022 December 31, 2023 14,500 66,600 29,000 12,100 UCC N/A 108,900 78,700 7,300 N/A N/A 1,200 Michael selected December 31, 2022 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, 2021 through December 31, 2023. Business Income (loss) $(100,000) FMV $300,000 350,900 60,500 9,700 (242,000) (70,000) 40,000 62,900 12,100 500 Taxable Capital gain $ Nil Nil Nil 10,000 Net capital loss (22,000) Nil Nil Nil
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Ee 61.
Transcribed Image Text:2. Assume Michael expects to be able to use Quality Rest's losses by amalgamating Quality Rest with another corporation that he
owns. What are the implications if Michael elects under ITA 111(4)(e) to recognize capital gains and recapture at September 30, 2022?
Select the asset(s) eligible for the election:
Building
Land
Computer equipment
Ignore your previous choice(s) and ssume that an electi
Michael be able to utilize all expiring losses?
can and will be made on land. At what amount of elected proceeds will
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, 2022. 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 2021 - December 31, 2021
January 1, 2022 September 30, 2022
October 1, 2022 December 31, 2022
Cost
$145,200
280,000
100,000
14,500
66,600
29,000
12,100
January 1, 2023
UCC
N/A
December 31, 2023
108,900
78,700
7,300
N/A
N/A
Michael selected December 31, 2022 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, 2021 through December 31, 2023.
1,200
Business
Income
(loss)
FMV
$300,000
350,900
60,500
9,700
62,900
12,100
500
$(100,000)
(242,000)
(70,000)
40,000
Taxable
Capital
VIA VENE
gain
Nil
Net
Nil
capital
$ Nil (22,000)
10,000
loss
Nil
Nil
Nil
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education