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, 2020. At that time, the values of certain assets owned by Quality Rest were as follows: Cost Land Building Furniture and fixtures Computer equipment Inventory Marketable securities Incorporation/organization $132,000 260,000 100,000 January 2019-December 31, 2019 January 1, 2020-September 30, 2020 October 1, 2020-December 31, 2020 January 1, 2021-December 31, 2021 13,200 60,500 26,400 11,000 UCC N/A 99,000 71,500 6,600 Business Income (loss) ($100,000) (220.000) (70,000) 40,000 N/A N/A costs Michael selected December 31, 2020 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, 2019 through December 31, 2021. 1,100 Taxable Capital gain FMV $300,000 319,000 55,000 8,800 57,200 11,000 400 $ 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 1(a). Calculate the business loss for tax purposes for the period January 1, 2020 through September 30, 2020.
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, 2020. At that time, the values of certain assets owned by Quality Rest were as follows: Cost Land Building Furniture and fixtures Computer equipment Inventory Marketable securities Incorporation/organization $132,000 260,000 100,000 January 2019-December 31, 2019 January 1, 2020-September 30, 2020 October 1, 2020-December 31, 2020 January 1, 2021-December 31, 2021 13,200 60,500 26,400 11,000 UCC N/A 99,000 71,500 6,600 Business Income (loss) ($100,000) (220.000) (70,000) 40,000 N/A N/A costs Michael selected December 31, 2020 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, 2019 through December 31, 2021. 1,100 Taxable Capital gain FMV $300,000 319,000 55,000 8,800 57,200 11,000 400 $ 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 1(a). Calculate the business loss for tax purposes for the period January 1, 2020 through September 30, 2020.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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, 2020. At that
time, the values of certain assets owned by Quality Rest were as follows:
Cost
Land
Building
Furniture and fixtures
Computer equipment
Inventory
Marketable securities
Incorporation/organization
$132,000
260,000
100,000
January 2019-December 31, 2019
January 1, 2020-September 30, 2020
October 1, 2020-December 31, 2020
January 1, 2021-December 31, 2021
13,200
60,500
26,400
11,000
Business
Income
UCC
N/A
(loss)
($100,000)
(220,000)
(70,000)
40,000
99,000
71,500
6,600
costs
Michael selected December 31, 2020 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, 2019 through December 31, 2021.
N/A
N/A
1,100
Taxable
Capital gain
$
FMV
$300,000
319,000
55,000
8,800
57,200
11,000
400
Nil
Nil
Nil
10,000
Net capital
loss
($22,000)
N
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
1(a). Calculate the business loss for tax purposes for the period January 1, 2020 through September 30, 2020.
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