ADMS 3520 Chapter Notes - Chapter 7: Fair Market Value, Capital Gain, Capital Asset

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pucewildebeest131

9 Aug 2012

School

York University

Department

Administrative Studies

Course

ADMS 3520

Professor

Thaddeus Hwong

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Document Summary

When the capital asset is transferred actual proceeds forms part of the considerations for both the transferor and transferee. This means that the transferor will record the capital gains or loss by considering the actual sale proceeds and the same value forms part of the adjusted cost base for the transferee. Problems do arise when the capital asset is not transferred at an arm"s length. The transaction is not deemed to have been carried out at an arm"s length when the transferor and the transferee are related-ita 251(2)(a). Following is the rule when the transfer of a capital asset occurs in such a case. The following transfers are treated as qualifying transfers meaning thereby there will be no capital gains implications while the capital asset is transferred. They are as follows as per section 73(1) of ita: A transfer to the individual"s spouse or common law partner,

Related Questions

In a tranfer that qualified under sec. 351, George transferredequipment worth $750,000 (adjusted basis $400,000, depreciationrecapture potential $75,000). The equipment was subject to a$150,000 loan, which the transferee corporation assumed as part ofthis transaction. In exchange, George received (1) CS of thetransferee corporation worth $425,000, (2) promissory notes of thetransferee corporation worth $100,000 and (3) cash of $75,000(i.e., total consideration $500,000, with loan assumptionincluded). Answer each question below, which relate to thistransfer by George.

1) Determine the gain or loss realized byGeorge on this transaction.

2) Determine the gain or loss recognized byGeorge on this transaction.

3) Determine the basis that George will assign to the transfereecorporation CS received in this transaction

Determine the basis that George will assign to the PromissoryNotes received in this transaction

bluereindeer131

A shareholder receives stock valued at $500,000 and $50,000 cashfor two pieces of equipment as part of a Section 351 transaction.He transfers (1) Machine A with a fair market value of $330,000 anda basis of $300,000 and (2) Machine B with a fair market value of$220,000 and a basis of $250,000. How do you think the shareholdershould determine if he should recognize any gain on the transfer ofthe equipment? Comment on the result.

purpleyellowjacket806

Jane, Mario, and Ronald each own 100 of the 300 outstandingshares in the Crafty Corporation. On August 30, 2015, each of themtransfers property to the corporation in a transaction thatqualifies for non recognition under Code Section 351. Mariotransferred Property A, which had a tax basis of $150,000 and afair market value of $80,000 at the time it was transferred. Duringthe time Crafty held Property A, its fair market value declined to$40,000. On May 20, 2017 Crafty Corporation adopted a plan ofliquidation. Two days later, as part of this plan, Property A wasdistributed to Ronald.

a. Explain the tax consequences of this distribution for thecorporation.

b. Suppose that Ronald purchases 75 of Janeâs shares in 2016.What would be the tax consequences of the distribution?

ADMS 3520 Chapter Notes - Chapter 7: Fair Market Value, Capital Gain, Capital Asset

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