Memorandum

To: Accounting Associate

From: Tax Manager

Date: Month xx, Year xx

Subject: Green Proprietorship

Out client, Ms Green, has asked us to determine the impact of some transactions involving the sale of goodwill projected over the few next years.

Effective January 1, 2018, she purchased a health food store. As part of the purchase price she paid $20,000 for goodwill. She plans to build up the customer base, and in 2023 she expects to sell the store. As part of the selling price, she expects to receive $30,000 for goodwill.

Ms Green operates the store as a proprietorship, with a December 31st year end and intends to claim maximun CCA deduction.

In addition to considering the impact on income of the projected sale of goodwill in 2023 for $30,000, consider the impact if Ms Green sold the goodwill in 2023 for:

(a) $20,000; and

(b) $10,000

Assume that the legislation in this area remains unchanged in the period under consideration.