Tia Kline, a resident of Canada, is the sole shareholder of KI Inc. She plans to transfer four assets, which she owns, to KI Inc. in exchange for cash and preferred shares of KI Inc. She wishes to receive the maximum amount in cash that she can receive and still defer the recognition of income for tax purposes on the transfer of the assets. Tia and KI Inc. will jointly make a Section 85 election for each of the assets. The following is the details of the assets: Land Building Equipment. Goodwill Land Building Equipment Goodwill FMV ACB $ 230,000 $ 46,000 $ 115,000 10,350 46,000 $ 401,350 $ 181,000 $ 84,275 Required: For each of the four assets individually, state the amount that should be elected as proceeds under Section 85 of the Income Tax Act, state the amount of cash consideration, and state the value of the preferred shares Ms. Kline should accept as consideration for the assets $ FMV $ 230,000 $ 115,000 10,350 46,000 401,350 80,500 34,500 20,000 ACB 46,000 80,500 $ 34,500 UCC 0 57,500 9,200 17,575 20,000 $ 181,000 $ UCC 0 57,500 9,200 17,575 84,275 $ Elected amount 0 $ Cash Preferred Shares 0 $ 0
Tia Kline, a resident of Canada, is the sole shareholder of KI Inc. She plans to transfer four assets, which she owns, to KI Inc. in exchange for cash and preferred shares of KI Inc. She wishes to receive the maximum amount in cash that she can receive and still defer the recognition of income for tax purposes on the transfer of the assets. Tia and KI Inc. will jointly make a Section 85 election for each of the assets. The following is the details of the assets: Land Building Equipment. Goodwill Land Building Equipment Goodwill FMV ACB $ 230,000 $ 46,000 $ 115,000 10,350 46,000 $ 401,350 $ 181,000 $ 84,275 Required: For each of the four assets individually, state the amount that should be elected as proceeds under Section 85 of the Income Tax Act, state the amount of cash consideration, and state the value of the preferred shares Ms. Kline should accept as consideration for the assets $ FMV $ 230,000 $ 115,000 10,350 46,000 401,350 80,500 34,500 20,000 ACB 46,000 80,500 $ 34,500 UCC 0 57,500 9,200 17,575 20,000 $ 181,000 $ UCC 0 57,500 9,200 17,575 84,275 $ Elected amount 0 $ Cash Preferred Shares 0 $ 0
Chapter19: Corporations: Distributions Not In Complete Liquidation
Section: Chapter Questions
Problem 41P
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ISBN:
9780357109731
Author:
Hoffman
Publisher:
CENGAGE LEARNING - CONSIGNMENT