The questions below are based on the following information:
Jolinda Morris has a depreciable property with a capital cost of $225,000, a UCC of $175,000, and a fair market value of $240,000. Because of his exceptional performance during the last year, she gives this property to her common-law partner Biff.
-What is the minimum increase in Net Income For Tax Purposes that Ms. Morris will record as a result of this gift if she does elect out of ITA 73(1)?

Question

Quizplus · Accepted Answer

The minimum increase in Net Income For Tax Purposes that Ms. Morris will record as a result of this gift if she does elect out of ITA 73(1) is $57,500. This is because the fair market value of the property ($240,000) is greater than its UCC ($175,000), so the difference ($65,000) is considered a capital gain. However, because Ms. Morris is electing out of ITA 73(1), only 50% of the capital gain ($32,500) is included in her income. Therefore, the minimum increase in Net Income For Tax Purposes is $32,500.

The Questions Below Are Based on the Following Information