sol11-11 - Problem 11-11S SOLUTION Deemed Year-End Style...

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Problem 11-11S SOLUTION Deemed Year-End Style Ltd. is deemed to have a year-end immediately before the acquisition of control by Pro Ltd. on March 31, 2011 (ssec. 249(4)). Net Capital Losses The $6,000 accrued capital loss on the marketable securities will be deemed to be an allowable capital loss of $3,000 for the period ended March 31, 2011 (par. 111(4)( d )). The adjusted cost base of the securities will be reduced to their fair market value of $3,000 (par. 111(4)( c )). Unless taxable capital gains are generated in the taxation year ending March 31, 2011, the allowable capital loss of $3,000 will become a net capital loss and expire on the acquisition of control. Style Ltd. may elect to realize a capital gain on the land of up to $200,000 and/or on the building of up to $15,000. Style Ltd. should elect to generate a capital gain on the land of $6,000. This will generate taxable capital gain of $3,000 which will be sufficient to offset the allowable capital loss deemed to have been realized on the acquisition of control. This will cause the adjusted cost
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sol11-11 - Problem 11-11S SOLUTION Deemed Year-End Style...

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