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

Ms. Jennifer Jacks has owned a triplex for a number of years and, throughout this period, all three of the units were rented. In determining her income from this property, she deducted maximum CCA in each year. During the current year, Ms. Jennifer Jacks moved into one of the three units and, as a result, will be reporting reduced rental revenue on her income tax return. As Ms. Jennifer Jacks has not sold any property, she will not report any capital gains or losses for the current year.

Case B

Cole Connors sold a property with an adjusted cost base of $145,000 for $280,000. He provided a warranty on the property that he estimates would cost him about $10,000 to service. As a result, he calculated his capital gain to be $125,000.

Case C

Rose Falcon sold a table to her daughter for $1,200 and a painting to her son for $800. These selling prices equaled their estimated fair market value. Several years ago, Rose Falcon purchased the table for $1,900 and the painting for $700. She did not report any capital gain or loss on her 2018 individual income tax return.

Case D

Lawrence Walker purchased a cottage in 2015 for $325,000, with the land being worth $50,000 and the cottage being worth $275,000. He rarely used the cottage, since he preferred to live in his Victoria condo. In 2018, the cottages current value is $900,000 and the land is $50,000. In 2018, he decided to convert the cottage into a rental property. Lawrence Walker has told everyone that, in 2018, he will report all of his rental income, but he does not intend to recognize a gain or loss on the conversion of the property, since no disposition has occurred.

Case E

Several years ago, Mr. John Wong transferred three sports cars, with a $195,000 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 Mr. John Wongs estate. Unfortunately, Mr. John Wong 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 Mr. John Wong to continue to hold the shares. Consequently, he sold the shares for $500 to a friend who needed a corporate shell for some business operations. Mr. John Wong used the allowable capital loss of $97,250 [1/2 ($195,000 - $500)] to offset his taxable capital gains arising from real estate transactions.