Chapter 16 summary notes Summary of chapter 16. Useful to look over before exam or doing homework.

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Accounting & Financial Management
AFM 461
Stanley Laiken

Chapter 16 when transferring assets to a corporation the corporation can elect it to be a tax free transfer using 851 elected priceUpper limit FMV of property transferredLower limit FMV of boot transferred The corporations position page 947Elected transfer pricecorporations cost of property 851aFor depreciable property o Capital cost to the corporationcapital cost of the property to the transferor o Deemed to have CCAcapital costtransfer price year rule does not apply in the election if o tranferor was not dealing at arms length with the corporation at the time of the transfer o the property was owned by the tranferor for the period from at least 365 days before the end of the taxation year in which the asset was acquired to the date of the election shareholders positionelected transfer price is allocated to the cost of property received boot or sharesallocation order o boot up to fmv as long as the fmv is not more than the fmv of the assets transferred 851f o preferred shares up to fmv as long as it is not more than fmv of assets transferredfmv of boot851g o common shares 851h puc of shares receivedpuc of shares received is dependent on the tax value and the boot receivedwe want to make the puc to make the transferor in the exact same position if she had kept the asset and sold it at fmvex if she gave an asset with tax value of 10 and fmv of 15 and got 9 boot and 6 shares then the shares will have puc of 1 o when she sells it shell only have to pay tax on 61 5 of the shares This is the same situation she was in if she sold the asset for 15recall proceeds of redemptionPUCdeemed dividend thus if we have 0 puc then all of the proceeds of redeeming a share will be a dividend not capital gain which could have used QSBC deduction
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