Question

During the current year M sold all of her class 10 property to Q Inc., a...

During the current year M sold all of her class 10 property to Q Inc., a corporation controlled by M. The property, which originally cost $106,000, was valued at $30,000. The UCC of class 10 at the beginning of the current year was $50,000. What is the amount of the decrease to M’s net income for tax purposes, if any, for the current year as a result of the sale of the class 10 property?

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Answer #1

The cost of the property is generally reported at the lower of Cost or market value for tax purposes. As can be seen in this scenario, the property was valued at $30,000 as against the original cost of $1,06,000. Also, The Undepreciated capital cost at the beginning of the current year stood at $50,000 which is more than the actual sale value to Q Inc.

So, there is a loss of $20,000 involved in the sale of the property for M which will directly result in the decrease of the net income during the current year.

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