Capital Gains Problem 2 (3 marks)

During the year Amy began her own business selling jewelry. The business has so far been very successful and Amys net business income has been correctly calculated as $48,120.

Amy requires capital to continue to grow this business. Her mother who was an avid sailor died in 2006, leaving Amy her sailboat and shares in Lemon Inc. Amys fair market value (FMV) and adjusted cost base (ACB) are as follows:

	FMV	ACB
Lemon Inc. shares	49,000	54,750
Sail boat	47,000	65,000

She has no income from the sail boat which is sitting in storage and earns $1,500 in non-eligible dividends from the Lemon Inc. shares per year. The dividends and net business income are her only income sources in 2019.

She wants to sell one of the assets and isnt sure of the tax consequences. She wants to know if she will have to include any amounts from the sale of the shares and sailboat in her income.

Required:

1. Explain to Amy the tax consequences of selling the shares (1 marks).

2. Explain to Amy the tax consequences of selling the sailboat (1 marks).

3. What asset would you suggest Amy sells? Why? (1 marks).

1. Explain to Amy the tax consequences of selling the shares (1 marks).

2. Explain to Amy the tax consequences of selling the sailboat (1 marks).

3. What asset would you suggest Amy sells? Why? (1 marks).