1) During the current year, Mr. Thomas Nelson transferred a depreciable capital property to a new corporation. Mr. Nelson owns all of the shares in the new corporation. The corporation will have a December 31 year end.

The transferred property was the only asset in its CCA class. It had been purchased several years ago for $225,000. Because of increasing difficulty in acquiring this type of property, it now has a fair market value of $316,000. At the time of the transfer, the balance in the UCC class was $189,600.

In order to absorb a $40,000 capital loss on a stock sale in the current year, he elects to transfer the property at a value of $265,000 ($225,000 + $40,000).

As consideration, Mr. Nelson takes back a note for $150,000, preferred shares with a fair market value of $50,000, and common shares with a fair market value of $116,000.

Describe the income tax implications resulting from this transaction. Your answer should include both current tax implications, and the determination of values that will have future tax implications