Michael Chan purchased 100% of the issued shares of Quality Rest Inc., a Canadian-controlled private corporation, which owns and operates an assisted-living retirement home in Ontario. Quality Rest has a December 31 fiscal year end. The transaction closed on October 1, 2020. At that time, the values of certain assets owned by Quality Rest were as follows: Cost Land Building Furniture and fixtures Computer equipment Inventory Marketable securities Incorporation/organization $132,000 260,000 100,000 January 2019-December 31, 2019 January 1, 2020-September 30, 2020 October 1, 2020-December 31, 2020 January 1, 2021-December 31, 2021 13,200 60,500 26,400 11,000 UCC N/A 99,000 71,500 6,600 Business Income (loss) ($100,000) (220.000) (70,000) 40,000 N/A N/A costs Michael selected December 31, 2020 as the first fiscal year-end for Quality Rest after the acquisition. The following is a schedule of Quality Rest's income and unused losses for the period January 1, 2019 through December 31, 2021. 1,100 Taxable Capital gain FMV $300,000 319,000 55,000 8,800 57,200 11,000 400 $ Nil Nil Nil 10,000 Net capital loss ($22,000) Nil Nil Nil Required: Assuming Quality Rest does not make an election to recognize accrued gains or recapture under paragraph 111(4)(e) of the Income Tax Act 1(a). Calculate the business loss for tax purposes for the period January 1, 2020 through September 30, 2020.
Michael Chan purchased 100% of the issued shares of Quality Rest Inc., a Canadian-controlled private corporation, which owns and operates an assisted-living retirement home in Ontario. Quality Rest has a December 31 fiscal year end. The transaction closed on October 1, 2020. At that time, the values of certain assets owned by Quality Rest were as follows: Cost Land Building Furniture and fixtures Computer equipment Inventory Marketable securities Incorporation/organization $132,000 260,000 100,000 January 2019-December 31, 2019 January 1, 2020-September 30, 2020 October 1, 2020-December 31, 2020 January 1, 2021-December 31, 2021 13,200 60,500 26,400 11,000 UCC N/A 99,000 71,500 6,600 Business Income (loss) ($100,000) (220.000) (70,000) 40,000 N/A N/A costs Michael selected December 31, 2020 as the first fiscal year-end for Quality Rest after the acquisition. The following is a schedule of Quality Rest's income and unused losses for the period January 1, 2019 through December 31, 2021. 1,100 Taxable Capital gain FMV $300,000 319,000 55,000 8,800 57,200 11,000 400 $ Nil Nil Nil 10,000 Net capital loss ($22,000) Nil Nil Nil Required: Assuming Quality Rest does not make an election to recognize accrued gains or recapture under paragraph 111(4)(e) of the Income Tax Act 1(a). Calculate the business loss for tax purposes for the period January 1, 2020 through September 30, 2020.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter13: Investments And Long-term Receivables
Section: Chapter Questions
Problem 8MC
Related questions
Question
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:
9781337690881
Author:
Jay Rich, Jeff Jones
Publisher:
Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:
9781337690881
Author:
Jay Rich, Jeff Jones
Publisher:
Cengage Learning