Sandbox Inc., a Canadian Controlled Private corporation (CCPC), operates a small manufacturing business. The business began in 19X5. At that time, Sandbox acquired a small building to house the manufacturing operations. The building, which cost $400,000, was 35 years old at the time. At December 31, 2019, the undepreciated capital cost (UCC) of its manufacturing assets was:

Class 1 -4%	$220,000
Class 17- 8%	22,000
Class 43 - 30%	180,000

In June 2020, Sandbox decided to purchase another manufacturing building and new manufacturing equipment. Two buildings were being considered. Building A was constructed in 2003 and has been used by another company. Building B was recently constructed and completed in May 2020. The cost of each building is $800,000. Approximately 93% of the floor space of the acquired building will be used for manufacturing. Both buildings have gravel parking facilities and Sandbox plans to pave either lot at a cost of $28,000. In July 2020, Sandbox sold used manufacturing equipment for $75,000 (with an original cost of $160,000) and will purchase new equipment for the new building at a cost of $400,000.

The new building has extra space for expansion. In fact, it has enough space to absorb the entire operations of the existing building. However, the intention at this time is to preserve the extra space in the new building for anticipated business growth.

Required

Describe the tax implications of the 2020 transactions. Would Sandbox Inc be better to purchase Building A or B? Be sure to support your discussion with any necessary calculations.

Answer rating: 100% (QA)

Sandbox has reviewed the new building and has determined that the building will last for at least 60 ... View the full answer