Quantro Enterprises Ltd. and Baizley Holdings Ltd. (BHL) are both 100% owned by Harold Baizley. Both companies are Canadian-controlled private corporations. Quantro operates a wholesale business and pays rent to BHL for the use of a warehouse property.BHL owns only one asset-the warehouse building and related land that is rented by Quantro for $36,000 per year. The property wasoriginally owned by Quantro but was sold to BHL several years ago as a means to reduce the risk exposure of this appreciating asset.On December 31, 2023 (the year-end of both companies), BHL sold the warehouse property to a third party for $370,000 (land$40,000, building $330,000). The property originally cost $320,000 (land $25,000, building $295,000). The undepreciated capitalcost of the building at December 31, 2022, was $254,000.One month before selling the warehouse property, BHL purchased a newly constructed warehouse property for $480,000. (land$50,000, building $430,000.).Required:Determine BHL's net income for tax purposes for 2023.RentCCA on new warehouseRecapture of CCAProperty IncomeLand Taxable capital gainsBuilding: Taxable capital gainsTaxable Capital Gains0Net Income for Tax purposes$0

An asset's profit on sale that has gained in value during the holding term is known as a capital…

Answered: Quantro Enterprises Ltd. and Baizley…

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter15: Choice Of Business Entity—other Considerations

Section: Chapter Questions

Problem 79P

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Castle Construction, Inc. is a real estate development company organized as an S corporation. The company's sole shareholder, Celia, has a tax basis in her Castle stock of $100,000. This year, the company reported a net operating loss of ($129,000). It also decided to distribute a parcel of land with a tax basis (to Castle) of $65,000 and a fair market value of $185,000. Prior to the distribution, Castle was holding the land as inventory. It decided to distribute the land to Celia because it no longer planned to develop that particular property. 1. Will Celia recognize any gain in connection with the receipt of the distribution? See Treasury Regs. §1.1367-1(f). 2. What will be her tax basis in the land? 3. What will be her remaining tax basis in her stock after accounting for the distribution? 4. How would your answers change if the land had been encumbered by a $75,000 liability, for which Celia assumed personal responsibility upon receipt of the distribution?
Melanie transferred the following property to M Corp. (a controlled corporation) in exchange for 100% of M Corp.’s stock (FMV = $100,000): Equipment (FMV = $40,000; basis = $10,000) Land (FMV = $60,000; basis = $10,000) What is Melanie’s basis in the M Corp. stock? and What is M Corp.’s total basis in the equipment and land?
Silo, Incorporated sold investment land to PPR, Incorporated for $110,000 cash. Silo's basis in the land was $145,000. Mr. and Mrs. Jersey own 100 percent of the stock of both corporations. Required: a. What is PPR's tax basis in the land purchased from Silo? b. PPR holds the land as an investment for seven years before selling it to an unrelated buyer. Compute the gain or loss recognized if the amount realized on sale is: (1) $100,000, (2) $116,000, or (3) $150,000. Complete this question by entering your answers in the tabs below. Required A Required B PPR holds the land as an investment for seven years before selling it totan unrelated buyer. Compute the gain or loss recognized if the amount realized on sale is: (1) $100,000, (2) $116,000, or (3) $150,000. Note: Enter a loss with a minus sign. (1) $100,000 (2) $116,000 (3) $150,000 Recognized Gain or Loss $ $ 0 5,000
Individual C owns all of the shares of Cee Ltd., a Canadian-controlled private corporation holding investments in marketable securities. Individual D owns all of the shares of Dee Ltd., a Canadian-controlled private corporation. Dee Ltd. purchased all of the shares of Cee Ltd. from C for $900,000 cash. The Cee Ltd. shares have a PUC and ACB of $100,000. C and D are sisters. Determine C's taxable income from the sale of shares to Dee Ltd. The balance in the GRIP account is nil $ C
Bridget transferred a piece of land she held personally to her wholly owned corporation using the provisions of ITA 85. The land had an adjusted cost base of $150,000 and a fair market value of $250,000 at the time of transfer. The property was mortgaged for $50,000. As consideration for the transfer, Bridget received cash of $200,000 and preferred shares with a legal stated capital of $10,000. The corporation assumed the mortgage. Which one of the following is the elected transfer price (first) and the adjusted cost base of the preferred shares (second)? a. $150,000 and Nil b. $250,000 and $240,000 c. $250,000 and Nil d. $260,000 and $50,000 Clear my choice
Jaharta, Inc., owns land used for truck farming and cattle raising. The California Division of Highways condemned 36 acres of Jaharta's land to build a new highway. Jaharta owned a 50% interest in property being used for apricot, prune, and walnut orchards. Jaharta used the proceeds received as a result of the condemnation to purchase the remaining in-terest in the property being used for orchards. What tax issues should Jaharta consider?
April Ltd. is located in Alberta, a province which does not participate in the HST program and has no provincial sales tax. All of its operations are in that province. During its current quarter, April Ltd. purchases an office building and land for a total of $1300000 before GST. The Company spends an additional $266000 (before GST) on office equipment. Office equipment is capital personal property. The building will be used 20% for taxable supplies and the remainder for exempt supplies. The office equipment is to be allocated in the same ratio. For accounting purposes, the building will be amortized over 35 years, while the office equipment will be written off over 5 years. Determine the input tax credits that April Ltd. can claim as a result of these capital expenditures.
Coconut, an individual, is the sole shareholder of Tropical Fruit Corporation, a U.S. based corporation. Coconut also owns the office building that serves as corporate headquarters for Tropical Fruit Corporation. Last year, Tropical Fruit Corporation paid $400,000 annual rent to Coconut for use of the building. Tropical Fruit Corporation 's marginal tax rate was 21% and Coconut's marginal tax rate on ordinary income was 37%. Also, Coconut's qualified dividend rate was 20%. The revenue agent who audited Tropical Fruit Corporation's return concluded that the fair rental value of the office building was $300,000. What is the net increased amount of Coconut and Tropical Fruit Corporation's combined income tax liability as a result of this audit conclusion? $4,000 $17,000 O $3,000 O $21,000
P Corporation is the U.S.-based parent of F Company, a French-based branch. If P Corporation has U.S. taxable income of $100,000 and F Company has a $20,000 loss, what is P Corporation’s worldwide taxable income?
Plainwell Ice Cream Corporation distributed property with a $300,000 fair market value and $20,000 adjusted basis to Luis, one of its shareholders. The property was subject to a $150,000 mortgage, which Luis assumed. Plainwell Ice Cream Corporation E & P is $200,000. How much of the property distribution is treated as dividend income, if any? How much gain, if any, does Plainwell Ice Cream Corporation recognize?
Baker Corporation owned a building located in Kansas. Baker used the building for its business operations. Last year, a tornado hit the property and completely destroyed it. This year, Baker received an insurance settlement. Baker had originally purchased the building for $350,000 and had claimed a total of $100,000 of depreciation deductions against the property. What are Baker's realized and recognized gain or (loss) on this transaction and what is its basis in the new building in the following alternative scenarios? (Leave no answer blank. Enter zero if applicable.) c. Baker received $450,000 in insurance proceeds and spent $400,000 rebuilding the building during the current year. Description Amount Basis of replacement property
Southwest is a private not-for-profit entity. It acquires Northeast, another private not-for-profit. The acquisition value is $980,000. Northeast has two assets (and no liabilities): equipment with a net book value of $120,000 but a fair value of $150,000 and a building with a net book value of $500,000 but a fair value of $800,000. Northeast expects to receive some support through donations and contributions. However, it is not expected to be predominantly supported by contributions and investment income. After the combination, what should be reported for goodwill? Choose the correct.a. $–0–b. $30,000c. $60,000d. $360,000

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