Assignment Problem Seven - 3

(Rental Income)

On March 1, 2019, Ms. Fox acquires a residential duplex for a total cost of $725,000. Of this total, it is estimated that the land has a value of $150,000 at the time of the acquisition. The two units are identical in size and, for purposes of allocation to a CCA class, the property is considered to be a single unit.

Before the end of March 2019, both units were rented. The tenants occupying one of the units asked that, in return for an additional amount of rent, Ms. Fox furnish the unit. Furniture and appliances for the unit were acquired by Ms. Fox on April 1, 2019, at a cost of $18,500.

During the year ending December 31, 2019, rents on the two units totalled $68,500. Expenses, other than CCA, totalled $28,000.

Late in 2020, the tenants in the furnished unit moved out. As Ms. Fox did not wish to continue renting the unit on a furnished basis, she sold the furniture and appliances to the departing tenants for $14,000.

During 2020, the two units generate total rent of $45,000. Ms. Fox incurred expenses, other than CCA, of $32,000.

Ms. Fox deducts the maximum CCA allowable in both years.

Required: Calculate Net Rental Income for each of the two years 2019 and 2020. Also, determine the UCC balances on January 1, 2021. Include in your solution any tax consequences associated with the sale of the furniture and appliances.