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 chart outlines the details of the assets. FMV ACB UCC Land Building Equipment Goodwill $ 230,000 $ 46,000 $ 115,000 80,500 57,500 10,350 46,000 34,500 20,000 9,200 17,575 $ 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. Land Building Equipment Goodwill FMV ACB UCC Elected amount Cash Preferred Shares $ 230,000 $ 46,000 0 115,000 80,500 $ 57,500 10,350 34,500 9,200 46,000 20,000 17,575 $ 401,350 $ 181,000 $ 84,275 $ 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 chart outlines the details of the assets. FMV ACB UCC Land Building Equipment Goodwill $ 230,000 $ 46,000 $ 115,000 80,500 57,500 10,350 46,000 34,500 20,000 9,200 17,575 $ 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. Land Building Equipment Goodwill FMV ACB UCC Elected amount Cash Preferred Shares $ 230,000 $ 46,000 0 115,000 80,500 $ 57,500 10,350 34,500 9,200 46,000 20,000 17,575 $ 401,350 $ 181,000 $ 84,275 $ 0 $ 0 $

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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