Boudin Inc. was incorporated 10 years ago in New Brunswick. On incorporation, all of the shares...

  

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Boudin Inc. was incorporated 10 years ago in New Brunswick. On incorporation, all of the shares were issued to Andre Boudin. The company carried on a business of distributing health food prod- ucts throughout the Maritime provinces. The company has always used a December 31 year end. The company operated successfully for a number of years. However, late in 2018, increased competition resulted in a steep decline in the sales of Boudin Inc. Because of this the company reported a business loss of $42,000 in 2019 and $123,000 in 2020. In addition, the company realized an allowable capital loss of $32,000 in 2020 as a result of the disposition of some temporary investments. There were no capital gains realized in 2020. In early 2021, seeing no real hope for a return to profitable operations, Mr. Boudin begins a search for a buyer for his company's shares. On May 1, 2021, all of the shares are sold to Healthy Bites Ltd., a manufacturer of health food products. This company hopes to be able to reverse the fortunes of Boudin Inc. Mr. Boudin is not related to the individuals who control Healthy Bites Ltd. For the short taxation year of January 1, 2021, to April 30, 2021, resulting from the acquisition of control, Boudin Inc. reported a business loss of $48,000. The reported business loss includes a write-down of inventories to their fair market values as required by ITA 10(1) on April 30, 2021, and a deduction for doubtful receivables, determined as a result of the application of ITA 111 (5.3). On April 30, 2021, Boudin Inc. owned the following properties with the following values: Asset Cost UCC FMV Long-term investments* Land $ 47,000 207,000 465,000 350,000 N/A N/A $360,000 190,000 $ 82,000 305,000 485,000 150,000 Building Equipment *Healthy Bites intends to sell these investments as soon as possible. Required: A. Indicate any non-capital and net capital loss balances that are tainted as a result of the acquisition of control. Assume the company will elect to trigger any eligible capital gains or recapture using FMV as the elected amount for property with accrued but unrealized gains (ITA 111(4)(e). If Healthy Bites Ltd. decides to only use the election(s) required to offset non-capital and net capital losses that would become tainted as a result of the acquisition of control, indicate the properties on which the elections should be made and the amounts that should be elected. В. C. Advise Healthy Bites Ltd. as to the recommended course of action (Part A or B). Boudin Inc. was incorporated 10 years ago in New Brunswick. On incorporation, all of the shares were issued to Andre Boudin. The company carried on a business of distributing health food prod- ucts throughout the Maritime provinces. The company has always used a December 31 year end. The company operated successfully for a number of years. However, late in 2018, increased competition resulted in a steep decline in the sales of Boudin Inc. Because of this the company reported a business loss of $42,000 in 2019 and $123,000 in 2020. In addition, the company realized an allowable capital loss of $32,000 in 2020 as a result of the disposition of some temporary investments. There were no capital gains realized in 2020. In early 2021, seeing no real hope for a return to profitable operations, Mr. Boudin begins a search for a buyer for his company's shares. On May 1, 2021, all of the shares are sold to Healthy Bites Ltd., a manufacturer of health food products. This company hopes to be able to reverse the fortunes of Boudin Inc. Mr. Boudin is not related to the individuals who control Healthy Bites Ltd. For the short taxation year of January 1, 2021, to April 30, 2021, resulting from the acquisition of control, Boudin Inc. reported a business loss of $48,000. The reported business loss includes a write-down of inventories to their fair market values as required by ITA 10(1) on April 30, 2021, and a deduction for doubtful receivables, determined as a result of the application of ITA 111 (5.3). On April 30, 2021, Boudin Inc. owned the following properties with the following values: Asset Cost UCC FMV Long-term investments* Land $ 47,000 207,000 465,000 350,000 N/A N/A $360,000 190,000 $ 82,000 305,000 485,000 150,000 Building Equipment *Healthy Bites intends to sell these investments as soon as possible. Required: A. Indicate any non-capital and net capital loss balances that are tainted as a result of the acquisition of control. Assume the company will elect to trigger any eligible capital gains or recapture using FMV as the elected amount for property with accrued but unrealized gains (ITA 111(4)(e). If Healthy Bites Ltd. decides to only use the election(s) required to offset non-capital and net capital losses that would become tainted as a result of the acquisition of control, indicate the properties on which the elections should be made and the amounts that should be elected. В. C. Advise Healthy Bites Ltd. as to the recommended course of action (Part A or B).

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a Noncapital loss will be on the equipment which is 48000 Whereas the capital loss is 32000 These we... View the full answer