Demo Ltd., a Canadian-controlled private corporation, sold two parcels of land during its 20X0 taxation year. Details of each transaction are as follows:
1. A one-hectare site in Winnipeg was sold for $200,000. The full price was received in cash. The land had been purchased five years before for $160,000. Demo had intended to construct a warehouse on the land for the purpose of storing inventory for its 12 retail stores. Subsequently, it was decided that the warehouse should be located in Saskatoon; for this reason, the Winnipeg site was sold.
2. A two-hectare site in Calgary was sold for $600,000.The land had been purchased two years previously for $320,000, with the intention that it would be sold after property values increased. Demo received a $90,000 down payment in 20X0.The full balance of the purchase price is due and payable in 20X4.
Required:
1. Determine the minimum increase to the 20X0 income for tax purposes of Demo Ltd. As a result of the two property sales (ignore interest considerations on any unpaid balance).
2. In what years will the gain, if any, be recognized for the Calgary property?