Section 85 Rollovers- Short Cases) lowing independent cases involve transfers of

Question

Section 85 Rollovers- Short Cases) lowing independent cases involve transfers of assets under ITA 85. Case One Depreciable assets with a fair market value of $183,400 are transferred a corporation in exchange for non-share consideration of $140,000, preferred shar es with a fair market value of $22,000 and common shares with a fair market value of $21,400. The assets had a capital cost of $130,000. They were the only assets in their Class and the UCC balance in the Class was $59,904 se Two Inventories of merchandise are transferred to a corporation in exchange Ca for $93,000 in non-share consideration and $27,000 in common stock (fair market value and legal stated capital). The inventories have a cost of $87,000 and a fair market value of $120,000 Case Three Land is transferred to a corporation in exchange for $72,000 in non-share consideration and $751,000 in common stock (fair market value and legal stated capital). The land cost $617,000 and has a current fair market value of $823,000 Required: For each of the three Cases provide the following information: A. The minimum and maximum transfer prices that could be elected under the provisions of ITA 85. Assuming the minimum value is elected, the amount of capital gain or business income to be included in the income of the transferor B. Again assuming that the minimum transfer value is elected, determine the adjusted cos base and PUC of the preferred and common stock consideration. Your answer should include the determination of any shareholder benefit under ITA 15(1) or deemed divi- r ITA 84(1) that will arise on the transfer, or explain why there is no benefit or deemed dividends.

Explanation / Answer

Case One Case Two Case Three FMV = $183400 $120,000 $823,000 Non share Consideration = $140000 Cost =$87000 $617,000 Preferred shares = $22000 Non share consideration = $93000 $72,000 Common shares = $21400 $27,000 $751,000 Capital costs = $130000 UCC Balance = 59904 A Minimum and maximum Transfer price As per ITS 85, upper limit or maximum = Fair market value Maximum Transfer price Case one FMV = $183400 Case Two FMV= $120000 Case Three FMV= $823000 Minimum Transfer price For depreciable capital property Case One Minimum transfer price = Greater of Boot = Non share consideration $140,000 Least of FMV 183400 Cost 130000 UCC 59904 59904 Elected Value $140,000 Case Two Minimum transfer price = Greater of Boot = Non share consideration $93,000 Least of FMV $93,000 Adjusted cost base $87,000 $87,000 Minimum Transfer price $93,000 Case Three Minimum transfer price = Greater of Boot = Non share consideration $72,000 Least of FMV $823,000 Adjusted cost base $617,000 $617,000 Minimum Transfer price $617,000 B Assuming the minimum value is elected, the amount of capital gain or business income to be included in the income of the transferor Case One Elected Value 140000 Less : Cost -130000 Capital Gain 10000 Case Two Elected Value 93000 Less : Cost -87000 Capital Gain 6000 Case Three Elected Value 617000 Less : Cost -617000 Capital Gain 0

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.