River Branley is the sole shareholder of Chinook Ltd.Chinook purchased all of the shares of Marble Inc.in 2017 for $500,000.Marble incurred a non-capital loss of $25,000 in the year ended December 31, 2018.River has decided to initiate a Section 88 wind-up of Marble into Chinook on June 23, 2020.Due to the seasonal nature of the sales, River would like to maintain the April 30^th year end that has been used since Chinook began.
River's accountant has prepared the following balance sheet for Marble Inc.as of June 22, 2020.The fair market value of the assets on both June 22, 2020 and the date of acquisition in 2017 are presented in the following table:
$\begin{array}{|l|c|c|c|}\hline&\text { June 22, 2020 } & \text { FMV June 22, } & \text { FMV } 2017\\&\text { (Cost) }&2020\\\hline \text { Shares in Brook Co. } & \$ 25,000.00 & \$ 80,000.00 & \$ 70,000.00 \\\hline \begin{array}{l}\text { Accounts Receivable (net of } \$ 2,000 \\\text { for doubtful accounts) } \end{array} & 18,000 & \$ 18,000.00 & \\\hline \text { Land } & 125,000 & \$ 500,000.00 & \$ 300,000.00 \\\hline \text { Building (UCC) } & 100,000 & \$ 300,000.00 & \$ 210,000.00 \\\hline \text { Total Assets } & \$ 268,000.00 \\\hline \text { Bank Loan } & \$ 70,000 \\\hline \text { Common shares } & 10,000 \\\hline \text { Retained earnings } & 188,000 \\\hline \begin{array}{l}\text { Total shareholder's equity and } \\\text { liabilities }\end{array} & \$ 268,000.00 \\\hline\end{array}$

A.Determine the deemed asset values for the below as a result of the wind-up of Marble into Chinook.
$\begin{array}{|l|r|}\hline \text { Shares in Brook Co. } & \$ \\\hline \text { Accounts receivable } & \$ \\\hline \text { Land } & \$ \\\hline \text { Building } & \$ \\\hline\end{array}$
B.Calculate the value of the section 88(1)(d) 'bump' available on the ACB for the non-depreciable capital property.
C.Identify the assets which may use the bump, and the amount of the bump available for each asset identified.Also identify any unusable bump amount.
D.When will Chinook be able to use the non-capital loss from Marble?

Question

River Branley is the sole shareholder of Chinook Ltd.Chinook purchased all of the shares of Marble Inc.in 2017 for $500,000.Marble incurred a non-capital loss of $25,000 in the year ended December 31, 2018.River has decided to initiate a Section 88 wind-up of Marble into Chinook on June 23, 2020.Due to the seasonal nature of the sales, River would like to maintain the April 30^th year end that has been used since Chinook began.
River's accountant has prepared the following balance sheet for Marble Inc.as of June 22, 2020.The fair market value of the assets on both June 22, 2020 and the date of acquisition in 2017 are presented in the following table:

\begin{array}{|l|c|c|c|}\hline&\text { June 22, 2020 } & \text { FMV June 22, } & \text { FMV } 2017\\&\text { (Cost) }&2020\\\hline \text { Shares in Brook Co. } & \$ 25,000.00 & \$ 80,000.00 & \$ 70,000.00 \\\hline \begin{array}{l}\text { Accounts Receivable (net of } \$ 2,000 \\\text { for doubtful accounts) } \end{array} & 18,000 & \$ 18,000.00 & \\\hline \text { Land } & 125,000 & \$ 500,000.00 & \$ 300,000.00 \\\hline \text { Building (UCC) } & 100,000 & \$ 300,000.00 & \$ 210,000.00 \\\hline \text { Total Assets } & \$ 268,000.00 \\\hline \text { Bank Loan } & \$ 70,000 \\\hline \text { Common shares } & 10,000 \\\hline \text { Retained earnings } & 188,000 \\\hline \begin{array}{l}\text { Total shareholder's equity and } \\\text { liabilities }\end{array} & \$ 268,000.00 \\\hline\end{array}

A.Determine the deemed asset values for the below as a result of the wind-up of Marble into Chinook.

\begin{array}{|l|r|}\hline \text { Shares in Brook Co. } & \$ \\\hline \text { Accounts receivable } & \$ \\\hline \text { Land } & \$ \\\hline \text { Building } & \$ \\\hline\end{array}

B.Calculate the value of the section 88(1)(d) 'bump' available on the ACB for the non-depreciable capital property.
C.Identify the assets which may use the bump, and the amount of the bump available for each asset identified.Also identify any unusable bump amount.
D.When will Chinook be able to use the non-capital loss from Marble?

Quizplus · Accepted Answer

The Answer of River Branley is the sole shareholder of Chinook Ltd.Chinook purchased all of the shares of Marble Inc.in 2017 for $500,000.Marble incurred a non-capital loss of $25,000 in the year ended December 31, 2018.River has decided to initiate a Section 88 wind-up of Marble into Chinook on June 23, 2020.Due to the seasonal nature of the sales, River would like to maintain the April 30^th year end that has been used since Chinook began. River's accountant has prepared the following balance sheet for Marble Inc.as of June 22, 2020.The fair market value of the assets on both June 22, 2020 and the date of acquisition in 2017 are presented in the following table: $\begin{array}{|l|c|c|c|} \hline&\text { June 22, 2020 } & \text { FMV June 22, } & \text { FMV } 2017\ &\text { (Cost) }&2020\ \hline \text { Shares in Brook Co. } & \$ 25,000.00 & \$ 80,000.00 & \$ 70,000.00 \ \hline \begin{array}{l} \text { Accounts Receivable (net of } \$ 2,000 \ \text { for doubtful accounts) } \end{array} & 18,000 & \$ 18,000.00 & \ \hline \text { Land } & 125,000 & \$ 500,000.00 & \$ 300,000.00 \ \hline \text { Building (UCC) } & 100,000 & \$ 300,000.00 & \$ 210,000.00 \ \hline \text { Total Assets } & \$ 268,000.00 \ \hline \text { Bank Loan } & \$ 70,000 \ \hline \text { Common shares } & 10,000 \ \hline \text { Retained earnings } & 188,000 \ \hline \begin{array}{l} \text { Total shareholder's equity and } \ \text { liabilities } \end{array} & \$ 268,000.00 \ \hline \end{array}$ A.Determine the deemed asset values for the below as a result of the wind-up of Marble into Chinook. $\begin{array}{|l|r|} \hline \text { Shares in Brook Co. } & \$ \ \hline \text { Accounts receivable } & \$ \ \hline \text { Land } & \$ \ \hline \text { Building } & \$ \ \hline \end{array}$ B.Calculate the value of the section 88(1)(d) 'bump' available on the ACB for the non-depreciable capital property. C.Identify the assets which may use the bump, and the amount of the bump available for each asset identified.Also identify any unusable bump amount. D.When will Chinook be able to use the non-capital loss from Marble?

River Branley Is the Sole Shareholder of Chinook Ltd ADetermine the Deemed Asset Values for the Below as a All