For many years, Kargo Inc. has carried on business out of a building in Vancouver. The major

Fantastic news! We've Found the answer you've been seeking!

Question:

For many years, Kargo Inc. has carried on business out of a building in Vancouver. The major properties of this publicly traded Company are as follows:

Land and Building — The building was constructed for the Company at a total cost of $3,100,000. It is the only property in Class 1. The January 1, 2022 UCC balance in this Class is $1,286,690. The building is situated on land that the Company acquired at a cost of $430,000.

Equipment — All of the Company's equipment falls into Class 8. It has a capital cost of $670,000. The January 1, 2022 balance in Class 8 is $285,371.

The Company has become aware that, because of the real estate boom in Vancouver, their property has become very valuable. Further, because of the high cost of housing in the area, it has become almost impossible to attract new employees. Given this, they have decided to relocate.

They begin the process by selling their Vancouver properties and temporarily suspending business. The total proceeds for the land and building are $4,800,000, with $1,500,000 of this total reflecting the value of the land and $3,300,000 for the building. The equipment is sold for $523,000.

After more investigation than they had anticipated, they finally conclude that Vernon, British Columbia would be an attractive and cost efficient location. In March, 2023, they acquire a property in that city for $4,300,000. Based on estimates, $3,500,000 is for the building and $800,000 for the land. As it is not a new building, it does not qualify for the enhanced Class 1 CCA rate of either 6% or 10%.

The Class 8 equipment is replaced at a cost of $723,000.

The Company uses a calendar based taxation year ending on December 31. At the end of its 2022 taxation year the company does not own any buildings or equipment as the building Kargo ultimately purchased was not available for use on that date. The Company would like to minimize any capital gains or recapture resulting from the sale of the Vancouver property.

For the disposition of each property, indicate the income tax consequences for the 2022 taxation year.