Josef transferred a piece of land he held personally to a corporation in which h
ID: 2737990 • Letter: J
Question
Josef transferred a piece of land he held personally to a corporation in which he owned all of the shares using the provisions of ITA 85. The adjusted cost base of the land was $60,000 and it had a fair market value of $195,000 at the time of the transfer. Josef elected a transfer price of $60,000. As consideration for the property, he received a promissory note for $30,000, preferred shares with a fair market value of $105,000 and common shares with a fair market value of $60,000. Which one of the following is the adjusted cost base of the preferred shares (first) and the adjusted cost base of the common shares (second)?
Nil and $30,000
$30,000 and Nil
$19,090.50 and $10,909.50
$105,000 and $60,000
Nil and $30,000
$30,000 and Nil
$19,090.50 and $10,909.50
$105,000 and $60,000
Explanation / Answer
Basis of land = $60000
Less: Promisory note = $30000
Basis for preference and equity stock = $60000-$30000 = $30000
Basis for preference stock = $30000 * 105000 / 165000 = $19,090.50.
Basis for Equity Stock = $30000 * 60000/165000 = $10909.50
Therefore, the correct answer is option C.
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