John Torros has an unlimited life franchise that cost $150,000.His cumulative eligible capital balance is $90,490 and the current fair market value of the franchise is $225,000.Using the provisions of ITA 85(1), this asset is transferred to a corporation in return for cash of $100,000 and common shares with a fair market value of $125,000.Which of the following amounts is the minimum value that John could elect for the transfer.

Question

Quizplus · Accepted Answer

The minimum value that John could elect for the transfer is $120,653, which is the cumulative eligible capital balance of $90,490 plus the lesser of the fair market value of the franchise ($225,000) and the cash received ($100,000).

John Torros Has an Unlimited Life Franchise That Cost $150,000