Canadian income tax act 2012 – Assignment Example
The focus of this sale is to ensure that the corporation pays less tax. In this case, the sale price to be used is the FMV and not the book value of the assets at Sidney sole proprietorship. According to the tax law, goodwill will be treated as an intangible property in this case.
In the case of Sidney, the only intangible asset is Goodwill which will be classified as intangible property. The gain or loss on each of the listed assets will be figured separately. In this case, the sale of the capital assets will result in either a capital gain or a capital loss. In the same way, sale of the real property will held for longer than one year will result in either long time gain or a capital loss.
The startup costs will be considered as the investment into the business or assets and will be amortized for 15 years. In order to estimate the tax liability in this case:
We obtain the total sum of the FMV of all the assets in the business. In this case, they amount to $282,000. In order to limit the capital gains tax, all the assets and liabilities of the sole business should subsequently become the assets and liabilities of the corporation. Similarly, the shareholding of Sidney in the new corporation should not be less than 50% of the total power of voting in the organization. Similarly, Sidney should not receive any benefits from the transfer except the shares he allots to himself.
Description of assets
Cost or ACB
UCC or CEC
b) The ACB of the consideration received by Sidney is ($282000/&1) = 282 000, shares
c) The PUC becomes ($282,000-$85000)= $197 000
d) The cost of the property equals the total costs of the assets= $176 000
e) The deadline for filing the election form is May 31st
f) After reviewing the tax files of the organization, it has come to my notice that George our partner is yet to file the Form T2057 which rolled over the business to the corporation. This conduct is certainly wrong and can lead to the authorities fining the organization a large sum as specified in the tax laws. In this regard, we shall write a letter to the tax office to address the anomaly and ensure that the form is duly filed with the authorities.
Perry, J. Harvey. Taxation in Canada. 5th ed. Toronto, Ont.: Canadian Tax Foundation, 1990. Print.