Harley Krane purchased a side-by-side duplex in 2018 for $115,000 (land $25,000, building $90,000). The units were designed and previously used for residential use but Harley used them for his business.

Both units were used to conduct his law practice; one unit housed a small group of paralegals in his employ, who processed most of the real estate transactions for his clients.

In 2020, Harley stopped practising real estate law in order to concentrate on family law and terminated the staff positions of all paralegals. He then occupied the freed-up duplex unit as his personal residence, which meant he no longer had to commute.

At the end of 2019, the duplex building had an undepreciated capital cost of $80,000. Recently, a duplex of similar size across the street was sold for $160,000.

Required:

How will Harleys net income for tax purposes for 2020 be affected by the above activity?

2020 CCA calculation

2020 opening UCC

less deemed disposal-1/2 duplex

Interim UCC

less 2020 CCA

2020 ending UCC

2020 capital gain calculation

Deemed disposal Proceeds

less 1/2 duplex Adjusted Cost Base

Capital gain

Taxable capital gain

Harley's increase in net income for tax purposes