Problem 1. (15 marks)

Microfast Ltd. has a calendar-based taxation year ending December 31. As of January 1, 2022,

Microfast had a $347,291 UCC balance for its Class 8 depreciable property.

Other information:

On March 1, 2022, the company purchased class 8 property for $111,256. As a result of trading in older class 8 property, the company received a trade-in allowance of $20,000, resulting in a net cost for the new property of $91,256. The capital cost of the property traded in was 58,425.

It is the policy of the company to deduct the maximum CCA in each year.

Required: Calculate the maximum CCA for the 2022 taxation year. Your answer should include the maximum CCA for this class. In addition, indicate the amount of any recapture, terminal loss, or taxable capital gain that results from dispositions in 2022. The UCC balance on January 1, 2023, is not required. Assume that any purchases of depreciable property would have met the conditions to qualify for the ASCII. Ignore any GST/HST or PST considerations.

Problem 2. (15 marks)

Mr. Stewart Simms has lived most of his life in Vancouver. In 1998, he purchased a three-bedroom home near English Bay for $125,000. In 2002, he acquired a cottage in the Whistler ski area at a cost of $40,000. In all subsequent years, he has spent at least a portion of the year living in each of the two locations. When he is not residing in these properties, they are left vacant.

On October 1, 2022, Mr. Simms sold the English Bay property for $915,000 and the cottage at whistler for $720,000. Mr. Simms wishes to minimize any capital gains resulting from the sale of the two properties.

Required: Describe how the two residences should be designated to optimize the use of the principal residence exemption. In addition, calculate the amount of the taxable capital gains that would arise under the designation that you have recommended. Show all supporting calculations,