On December 31 of the current year, Invest Inc. sold a rental property for $130,000 (land $70,000 and building $60,000). Invest Inc. had acquired the property eight years ago for a total of $95,000 (land $30,000 and building $65,000). At the end of the previous year, the building had an undepreciated capital cost (UCC) balance of $35,000.

What is Invest Inc.'s taxable capital gain for the rental property? Explain why.

a)

$12,500 [Land: $20,000; Building ($7,500)]

b)

$12,500 [Land: $40,000; Building ($15,000)]

c)

$20,000 [Land: $20,000; Building $0]

d)

$40,000 [Land: $40,000; Building $0]