Question

Tatiana sold a parcel of land to her adult son for $100,000. Tatiana acquired this land...

Tatiana sold a parcel of land to her adult son for $100,000. Tatiana acquired this land for $100,000 five years ago and the fair market value of this land is $150,000. Which of the following statements is true?

The capital gain for Tatiana is $50,000 and the adjusted cost base for her son is $150,000.

The capital gain for Tatiana is $25,000 and the adjusted cost base for her son is $150,000.

The capital gain for Tatiana is $50,000 and the adjusted cost base for her son is $100,000.

The capital gain for Tatiana is $25,000 and the adjusted cost base for her son is $100,000.
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Answer #1

Answer = the capital gain for Tatiana is $50000 and the adjusted cost base for her son is $100000

Explanation =

Capital gain or loss = fair market value - purchase cost

Therefore capital gain for titiana = 150000-100000 = $50000

Adjusted cost base (ACB) of an asset is the price you pay to acquire it.Additionally you can include the capital cost like cost of addition or improvement of machine.

Therefore adjusted cost base for her son is $100000 because it was what he has paid to acquire it.

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