A business sells real property for $950,000, with $600,000 of this amount being allocated to the building and the remaining $350,000 allocated to the land. The building, the only asset in its Class, had a capital cost of $800,000 and a UCC of $650,000. The adjusted cost base of the land was $250,000. What are the tax consequences of this disposition?

Question

Quizplus · Accepted Answer

- The disposition of the building results in a capital gain of: 
    - Proceeds of disposition: $600,000 (allocated to building)
    - Less: UCC of building: $650,000
    - Capital loss: $50,000
- The disposition of the land results in a capital gain of:
    - Proceeds of disposition: $350,000 (allocated to land)
    - Less: Adjusted cost base of land: $250,000
    - Capital gain: $100,000
- The net capital gain is $50,000 ($100,000 - $50,000). 
- There is no terminal loss as the UCC of the building is higher than the proceeds of disposition.

A Business Sells Real Property for $950,000, with $600,000 of This