A-B, justify the tax treatment is correct or not.

Question 1(25 marks) Each of the following independent cases describes a situation with a proposed tax treatment. For each case, indicate whether the treatment is correct, and justify your conclusion. Case A. Several years ago. Ms. Barb Barn transferred four sports cars, with a $245,000 total fair market value. to a corporation, in return for all of the shares of the company. The cars were used for display purposes only and were not expensed/written off by the company. During the current year, all of the cars were destroyed in a fire on Ms. Barb Barn's estate. Unfortunately, the company did not insure the sports cars and, as a consequence, no compensation was available for the loss. The corporation had no assets other than the cars: therefore, there was no reason for Ms. Barb Barn to continue to hold the shares. Consequently, she sold the shares for $500 to a friend who needed a corporate shell for some business operations. Ms. Barb Barn used the $122.250 a lowable capital loss [1/2 X ($245,000 - $500)] to offset her taxable capital gains arising from real estate transactions. Case B: in zongu Samuel fort sold his son two itemsi a sofa for $1.500 and a painting for $900. These selling prices legaled hensionated to market value. Several years ago, Samuel Fort purchased the stocoland the painting for $600. He did not report any capital gain on loss on MINIMIC netur