A sole proprietor forms a corporation for their business, as sole shareholder, and transfers all assets used
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Question:
A sole proprietor forms a corporation for their business, as sole shareholder, and transfers all assets used in the business to the corporation, as follows:
- Cash: $150,000
- Computer equipment: original cost $110,000, undepreciated capital cost (UCC) $90,000, fair market value (FMV) $85,000
In exchange, the corporation transfers the following to the shareholder:
- Common shares of $180,000
- Preferred shares of $30,000
- Loan payable of $25,000
The shareholder and the corporation agree to execute a section 85 election so as to minimise tax arising from the transaction for the shareholder.
What will be the shareholder's adjusted cost base (ACB) of the common shares?
Related Book For
Introduction To Federal Income Taxation In Canada
ISBN: 9781554965021
33rd Edition
Authors: Robert E. Beam, Stanley N. Laiken, James J. Barnett
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