Pete Handyman is the sole proprietor of a hardware store, The Handyman Shop. Pete has decided to incorporate the business but wishes to minimize any income inclusions on the transfer of his business to the new corporation.
The Handyman Shop has the following assets:

As consideration for the transfer of the above assets, Pete would like to take back the maximum amount of debt and the balance in the form of common shares. There is no goodwill value in the business.
REQUIRED
Determine the appropriate transfer price under section 85 for the assets which can and should be transferred. Determine the amount of debt and share consideration that Pete can accept without any adverse tax consequences. Compute the adjusted cost base and the PUC for tax purposes of the common shares received as consideration.

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Ta FMV value Cash $22,000 22,000 Inventory (cost: $44,000). Fumiture and fixtures (cost: S12.000) Building (S75,000 cost) Land 39,500 39,500 6,000 8,000 45,000 55,000 8,000 30,000