Mr. Smith operated a shoe repair business as a sole-proprietor for many years. He's recently decided to incorporate and needs a way to transfer his business assets into the corporation. He decides he'd like to use Section 85. He has the assets outlined below all of which are capital assets. Using this set of facts, answer the questions that follow.
ACB FMV
Cash $5,000 $5,000
Equipment $7,000 $9,000 (UCC is equal to ACB as no depreciation was taken)
Land $10,000 $13,000
What is the floor of the elected amount?

What is the ceiling of the elected amount?

If the desire was to eliminate tax, what elected amount should be chosen?

What is the highest amount of non-share consideration (boot) possible to take back without triggering tax?

If non-share consideration (boot) of $20,000 were taken back, what amount of income (dividend or gross gain/loss) would result?

If Mr. Smith takes back non-share consideration (boot) of $13,000, what would be the PUC of his share consideration?

If Mr. Smith takes back non-share consideration (boot) of $13,000, what would be the FMV of his share consideration?

Answer rating: 100% (QA)

Solution What is the floor of the elected amount 1700000 1429 What i... View the full answer