Meng Zheng Wishes to Transfer a Piece of Machinery to a Corporation

Meng Zheng wishes to transfer a piece of machinery to a corporation using ITA 85(1) . This machinery is currently used to produce income. It has a capital cost of $250,000, a UCC balance of $58,000 and a fair market value of $50,000. Which of the following statements is correct?

A) Section 85(1) does not apply. The terminal loss will be denied permanently if the property is transferred to the corporation.
B) This proposed transfer can be completed using ITA 85(1) . As an alternative, the property could be transferred to the corporation by selling it at fair market value, in which case the terminal loss will be deductible in the year of transfer.
C) Section 85(1) does not apply. The proceeds of the disposition are deemed to be the UCC amount, thereby disallowing the terminal loss.
D) This proposed transfer can be completed using ITA 85(1) . The terminal loss will be deductible to the transferor as long as the corporation continues to use the machinery to produce income.