Quantro Enterprises Ltd. and Baizley Holdings Ltd. (BHL) are both 100% owned by Harold Baizley. Both companies are Canadian-controlled private corporations. Quantro operates a wholesale business and pays rent to BHL for the use of a warehouse property.BHL owns only one asset-the warehouse building and related land that is rented by Quantro for $36,000 per year. The property wasoriginally owned by Quantro but was sold to BHL several years ago as a means to reduce the risk exposure of this appreciating asset.On December 31, 2023 (the year-end of both companies), BHL sold the warehouse property to a third party for $370,000 (land$40,000, building $330,000). The property originally cost $320,000 (land $25,000, building $295,000). The undepreciated capitalcost of the building at December 31, 2022, was $254,000.One month before selling the warehouse property, BHL purchased a newly constructed warehouse property for $480,000. (land$50,000, building $430,000.).Required:Determine BHL's net income for tax purposes for 2023.RentCCA on new warehouseRecapture of CCAProperty IncomeLand Taxable capital gainsBuilding: Taxable capital gainsTaxable Capital Gains0Net Income for Tax purposes$0

An asset's profit on sale that has gained in value during the holding term is known as a capital…

Answered: Quantro Enterprises Ltd. and Baizley…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On July 31, 2005, Paley Corporation transferred all right, title, and interest in several of its current research and development projects to Carla Saye, sole stockholder of Saye Company, in exchange for 55 of the 100 shares of Saye Company common stock owned by Carla Saye. On the same date, Martin Morgan, who is not related to Paley Corporation, Saye Company, or Carla Saye, acquired for $45,000 cash the remaining 45 shares of Saye Company common stock owned by Carla Saye. Carla Saye notified the directors of Paley Corporation of the sale of common stock to Morgan. Because Paley had recognized as expense the costs related to the research and development when the costs were incurred, Paley’s controller prepared the following journal entry to record the business combination with Saye Company:Investment in Saye Company Common Stock (55 x $1,000)………55,000Gain on Disposal of Intangible Assets …………………………………….55,000To record transfer of research and development projects to Carla Saye in…

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