A company is selling units in a limited partnership tax shelter. The company had acquired software for $ $50,000$ on the open market and transferred it to the limited partnership on the same day for $ $10,000,000.$ The prospectus prepared by the company states that the FMV of the software is $ $10,000,000$ and is supported by an appraisal. The tax shelter is registered with the CRA and is available as an investment opportunity in the current year. The company's gross entitlements are $ $2,000,000.$

The CRA reviews the tax shelter and determines that the FMV of the software on the day of transfer to the limited partnership is $ $50,000.$ The appraisal supporting the $ $10,000,000$ value was prepared by an independent appraiser. However, it was not prepared using normal valuation principles. The appraiser informed the CRA that all calculations were based on the assumptions and other relevant facts provided by the company. The appraiser was paid $ $75,000$ for the appraisal.

 

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