If a corporation acquires goodwill for $200,000, deducts maximum CEC for three years, and then sells the goodwill for $250,000, there will be an addition to the capital dividend account of $37,500.

Question

Quizplus · Accepted Answer

The addition to the capital dividend account would be based on the non-taxable portion of the capital gain, which is 50% of the gain. The gain here is $50,000 ($250,000 - $200,000), so the addition would be $25,000 (50% of $50,000), not $37,500.

If a Corporation Acquires Goodwill for $200,000, Deducts Maximum CEC