John sold a piece of land in 20X9 for $350,000.The land was recognized as capital property.The original cost of the land was $75,000.The selling costs incurred in 20X9 were $5,000.The terms of the payment included an immediate down payment of $50,000,with the remainder of the cost to be paid over the next three years in three equal payments.John wishes to report the minimum taxable capital gain allowed each year.How much will he report in 20X9? (Round all numbers to zero decimal places.)

Question

Quizplus · Accepted Answer

To calculate the minimum taxable capital gain, we first need to determine the adjusted cost base (ACB) of the land.

ACB = Original cost + Selling costs 
ACB = $75,000 + $5,000 
ACB = $80,000

Next, we need to calculate the capital gain from the sale:

Capital gain = Selling price - ACB 
Capital gain = $350,000 - $80,000 
Capital gain = $270,000

Since the sale took place in 20X9 and the down payment was received in the same year, John must report at least 1/3 of the capital gain in 20X9.

Minimum taxable capital gain in 20X9 = 1/3 x $270,000 - $50,000 
Minimum taxable capital gain in 20X9 = $27,000

Therefore, the best choice is B, since John must report a minimum taxable capital gain of $27,000 in 20X9.

John Sold a Piece of Land in 20X9 for $350,000