Tia Kline, a resident of Canada, is the sole shareholder of KI Inc. She plans to transfer four assets, which she owns, to KI Inc. in exchange for cash and preferred shares of KI Inc. She wishes to receive the maximum amount in cash that she can receive and still defer the recognition of income for tax purposes on the transfer of the assets. Tia and KI Inc. will jointly make a Section 85 election for each of the assets. The following is the details of the assets: 111 FMV ACB UCC Land Building Equipment 115,000 10,350 46,000 $ 401,350 $ 230,000 $ 46,000 $ 80,500 34,500 20,000 $ 181,000 $ 84,275 57,500 9,200 17,575 Goodwill
Tia Kline, a resident of Canada, is the sole shareholder of KI Inc. She plans to transfer four assets, which she owns, to KI Inc. in exchange for cash and preferred shares of KI Inc. She wishes to receive the maximum amount in cash that she can receive and still defer the recognition of income for tax purposes on the transfer of the assets. Tia and KI Inc. will jointly make a Section 85 election for each of the assets. The following is the details of the assets: 111 FMV ACB UCC Land Building Equipment 115,000 10,350 46,000 $ 401,350 $ 230,000 $ 46,000 $ 80,500 34,500 20,000 $ 181,000 $ 84,275 57,500 9,200 17,575 Goodwill
Chapter22: S Corporations
Section: Chapter Questions
Problem 30P
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Question
Transcribed Image Text:Tia Kline, a resident of Canada, is the sole shareholder of KI Inc. She plans to transfer four assets, which she owns, to KI Inc. in
exchange for cash and preferred shares of KI Inc. She wishes to receive the maximum amount in cash that she can receive and
still defer the recognition of income for tax purposes on the transfer of the assets. Tia and KI Inc. will jointly make a Section 85
election for each of the assets. The following is the details of the assets:
FMV
UCC
$ 230,000
115,000
10,350
46,000
АСВ
$ 46,000
80,500
34,500
20,000
$ 181,000
Land
Building
Equipment
57,500
9,200
17,575
$ 84,275
Goodwill
$ 401,350
Required:
For each of the four assets individually, state the amount that should be elected as proceeds under Section 85 of the Income
Tax Act, state the amount of cash consideration, and state the value of the preferred shares Ms. Kline should accept as
consideration for the assets
Elected
Preferred
FMV
ACB
UCC
Cash
amount
Shares
Land
$
230,000 $
46,000
Building
115,000
80,500 $
57,500
Equipment
10,350
34,500
9,200
Goodwill
46,000
20,000
17,575
$
401,350 $
181,000 $
84,275 $
O $
0 $
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