prob026 - $90,000 Building.

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Problem 26 (Text: Ch. 8) On March 1, 2008, Mr. Sole Proprietor sold for cash his printing shop, located in downtown Oakville, to a competitor, as indicated below: Cost UCC Jan. 1, 2008 Cash proceeds Accounts receivable net (see Note (1), below) $12,000 $ 8,000 Inventory 20,000 17,000 Land 20,000 75,000 Building — Class 3 60,000 $47,000 200,000 Equipment — Class 8 30,000 8,850 10,000 Goodwill 50,000 Additional information concerning the sale of business: (1) The accounts receivable cost is net of a $2,000 allowance for doubtful accounts which was claimed at the end of the preceding year. (2) Mr. Proprietor has been in the same business since 1975 and has a fiscal year ending December 31. During February 2008, Mr. Proprietor purchased the following capital property and other assets in order to start a new printing business in Northern Ontario: Land. ...........................................................
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Unformatted text preview: $90,000 Building. ....................................................... 135,000 Equipment Class 43. ................................ 50,000 Inventory. ...................................................... 25,000 Required: (A) Compute the minimum amount of income Mr. Proprietor must include in his 2008 tax return from the sale of the printing business, assuming he does not elect under sec. 44, par. 13(4)( d ) and section 22. (B) Compute the minimum amounts of income Mr. Sole Proprietor must include in his 2008 return if he elects under sec. 44, par. 13(4)( d ), and sec. 22. Also, compute the undepreciated capital cost on January 1, 2008 in Class 3. (C) Give a brief explanation to Mr. Sole Proprietor as to why the use of these elections is advantageous....
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