Bert and Ernie have a partnership together with the following information:

Sesame Buns Inc.

INCOME STATEMENT

December $31,2022$

Revenue $.........................................$ $$320,000$

Expenses $200,000$

Income before gain on asset sale $.....................$ $$120,000$

Gain on asset sale $.................................35,000$

Net income $......................................$ $$155,000$

They have each asked you to prepare their personal income tax return, and to that end have provided you with the following additional information.

i$)$ Each partner owns $50\%$

ii$)$ Bert was paid a salary of $$6,000$ and it is included in the expenses.

iii$)$ A $$1,000$ donation to a registered charity is included in the expenses.

iv$)$ The asset sold was a piece of land they had purchased in hopes of having their own building from which to operate their business; those plans fell through when the bank wouldn$$t advance the necessary loans. The $$35,000$ represents the net gain after real estate broker and legal fees of $$5,000.$

v$)$ Each partner uses $($and personally pays for$)$ his$/$her own car in the business. Bert$$s auto expenses for business use are $$1,500$ and Ernie$$s is $$3,500.$

vi$)$ The business was originally started by Bert. Ernie bought in several years later. He borrowed $$35,000$ from the bank to purchase his partnership interest and has paid $$1,800$ in interest on the bank loan.

vii$)$ Included in revenue is $$1,200$ in interest earned on a GIC.

viii$)$ Ernie$$s son is employed in the business and his wages of $$2,000$ are included in the expenses. He cleans up the store on weekends and does odd jobs. The $$2,000$ is considered reasonable, no T$4$ slip has been issued to him by the business.

ix$)$ SBI$$s December $31$ balance sheet shows that Bert had drawings of $$42,000$ and Ernie had drawings of $$35,000.$

You have agreed to do the following:

$($A$)$ Identify the amount of any income, including the types of income, that each of Bert and Ernie will include in their income tax returns. Identify any other items that will be included in their income tax returns including tax credits.

$($B$)$ Bert and Ernie are considering incorporating their partnership. What is the most significant property that needs to be considered on a section $85$ rollover of their business?