Ms. Smart owned a capital property that had an adjusted cost base of $100,000. In 2014, she granted Mr. Li an option to buy the property from her by the end of 2016 at an option price of $160,000. Mr. Li paid $16,000 to Ms. Smart for the option.

REQUIRED
(1) What are the income tax implications to Ms. Smart and Mr. Li in 2014?
(2) What are the income tax implications to Ms. Smart and Mr. Li in 2016 if:
(a) The call option expires?
(b) The call option is exercised?