Makeda Kemal Has Operated a Proprietorship for Five Years and Has

question 8

Essay

Makeda Kemal has operated a proprietorship for five years and has decided to incorporate the company this year.The following assets will be transferred to the corporation:
$$\begin{array} { | l | r | r | } \hline & \text { UCC/ACB } &{ \text { FMV } } \\\hline \text { Land } & \$ 50,000 & \$ 200,000 \\\hline \text { Building (capital cost } \$ 120,000 ) & 100,000 & 140,000 \\\hline \text { Equipment (capital cost } \$ 100,000 ) & 75,000 & 75,000 \\\hline \text { Goodwill } & \text { NIL } & 20,000 \\\hline\end{array}$$ The transfer will also include the company's inventory and accounts receivables.The inventory originally cost $25,000 and has a fair market value of $30,000.The accounts receivable have a fair market value of $10,000 and a cost of $12,000.
Makeda wishes to minimize the tax effect of this business decision using a Section 85 rollover where beneficial.Makeda will receive the maximum non-share consideration possible and the remainder of the transfer in preferred shares for assets transferred using Section 85.Any other assets will be transferred for non-share consideration.
Required:
A.What is the elected value for each of the assets transferred under Section 85?
B.What is the value of the non-share consideration that Makeda will receive for those assets benefitting from Section 85? (Show the amounts for each asset, and the total for all.)
C.What is the value of the preferred shares that Makeda must receive in order to defer any income inclusions from the assets that will benefit from Section 85? (Show the amounts for each asset, and the total for all.)
D.Identify any asset(s) not included in your previous answers, and briefly explain why they were excluded.(< 20 words per asset)
E.If Makeda elects to transfer the accounts receivable using a Section 22 election, what is the amount of Makeda's business loss that will be included in the corporation's income?
(Work must be shown for marks to be awarded.)

Recognize the reasons for international trade, including differences in resource endowments, economies of scale, and differences in tastes.

Calculate and interpret opportunity costs from given data to determine comparative advantages between countries.

Understand the effects of international trade on a country's net imports or exports based on world price and domestic demand and supply.

Explain the benefits and losses associated with tariffs and quotas on international trade.

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Definitions:

Limits

Boundaries or constraints that define the scope, extent, or nature of something, often established to regulate behaviors or processes.

Social Networking

A platform or space online where individuals can connect, share, and interact with each other.

Distracts

Refers to anything that diverts attention away from the intended focus, leading to a reduction in concentration or efficiency.

Face-to-Face Interactions

Direct social engagement between individuals in the same physical space, allowing for non-verbal cues and immediate feedback.