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 was originally 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, 20X1 (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 capital cost of the building at December 31, 20X0, 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 20X1.