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Allowable capital loss on shares

Franchise taxable capital gain

Legal fees for sale agreement of subsidiary

Less franchise capital gain reserve

Less net gain on sale of assets

Net income per financial statement

Recapture of CCA on franchise

taxable capital gain on sale of land

terminal loss on sale of building

For the year ended August 31, 2018, Zefer Ltd., a Canadian-controlled private corporation, reported a net income before income taxes of $600,900. The statement of income is summarized as follows: $505.800 Income from operations Other income: Interest Net gain on sale of assets 6,700 88,400 $600,900 Net Income per Financial Statements The net gain on the sale of assets consists of the following amounts: Gain on sale of franchise-$35,000 The franchise to operate a retail store was acquired seven years previously at a cost of $135,000. It was sold in 2018 for $170,000. The sale proceeds included a cash down payment of $20,000, with the balance payable in six annual instalments of $25,000 plus interest beginning in 2019. The franchise, which qualified as a class 14 asset, had an undepreciated capital cost of $122,400 at the time of the sale and was the only asset in its class. Gain on sale of warehouse property-$80,000 In July 2018, a warehouse property was sold for cash proceeds of $250,000 (land $180,000, building $250,000). The property had an original cost of $370,000 (land $60,000, building $310,000). The building, which was the only asset in class 1, had an undepreciated capital cost of $290,000. After the sale of the warehouse, temporary premises were leased until a new, larger warehouse was constructed. New land was purchased in January 2019 for $200,000. Construction of the new warehouse would be completed by July 2019 Loss on sale of shares of subsidiary-$26,600 Zefer sold shares of a subsidiary corporation for cash proceeds of $599,000.The shares were acquired five years ago for $625,600. Legal fees of $2,600 were paid to draw up the sale agreement and were charged to the legal expense account. For the year ended August 31, 2018, Zefer Ltd., a Canadian-controlled private corporation, reported a net income before income taxes of $600,900. The statement of income is summarized as follows: $505.800 Income from operations Other income: Interest Net gain on sale of assets 6,700 88,400 $600,900 Net Income per Financial Statements The net gain on the sale of assets consists of the following amounts: Gain on sale of franchise-$35,000 The franchise to operate a retail store was acquired seven years previously at a cost of $135,000. It was sold in 2018 for $170,000. The sale proceeds included a cash down payment of $20,000, with the balance payable in six annual instalments of $25,000 plus interest beginning in 2019. The franchise, which qualified as a class 14 asset, had an undepreciated capital cost of $122,400 at the time of the sale and was the only asset in its class. Gain on sale of warehouse property-$80,000 In July 2018, a warehouse property was sold for cash proceeds of $250,000 (land $180,000, building $250,000). The property had an original cost of $370,000 (land $60,000, building $310,000). The building, which was the only asset in class 1, had an undepreciated capital cost of $290,000. After the sale of the warehouse, temporary premises were leased until a new, larger warehouse was constructed. New land was purchased in January 2019 for $200,000. Construction of the new warehouse would be completed by July 2019 Loss on sale of shares of subsidiary-$26,600 Zefer sold shares of a subsidiary corporation for cash proceeds of $599,000.The shares were acquired five years ago for $625,600. Legal fees of $2,600 were paid to draw up the sale agreement and were charged to the legal expense account