Kresna Dubchuk lives in Kenya and is in the process of selling her Canadian real property, situated in New Brunswick, which has been rented to various tenants over the last 10 years. The selling price of the property is $100,000 and her ACB is $35,000. She will incur $6,500 in real estate commissions and $500 in legal fees in connection with the sale.
A few days after complying with the requirements concerning the proposed disposition of the property, Kresna receives a proposed assessment from the CRA for income taxes, plus penalties and interest.
REQUIRED
(a) Describe and detail Kresna's Canadian tax obligations arising on the sale of this property.
(b) What is the probable cause of the proposed assessment? Can you offer Kresna any professional assistance with regard to the proposed assessment? If so, detail what you might advise her.