Question 1

In Canada, Arnold Swartz converted his principal residence into a rental property after having lived in it for 5 years. The house had cost $1 million. At the time of conversion, the building had a fair market value of $1.4 million. What is the UCC balance in the rental property's Class 1 before any CCA is taken?

A. Nil

B. $1,400,000

C. $1,000,000

D. $1,200,000

Question 2

Canada tax

This year, May sold a parcel of land. The gross proceeds were $300,000 and the cost of land was $120,000. The proceeds of $300,000 are payable in four equal instalments of $75,000, due on June 1 each year, commencing this year.

What is the maximum capital gains reserve May can take this year?

A. $144,000

B. $0

C. $135,000

D. $225,000

Question 3

The following information relates to the sale of a piece of land in the current taxation year:

Adjusted cost base of land: $275,000

Total proceeds of disposition: $500,000

In the current year, the seller received $200,000 of the proceeds of disposition in cash and a note payable for the remainder ($300,000). What is the maximum ITA40(1)(a)(iii) capital gains reserve that can be claimed by the seller in the current year:

A. $0

B. $225,000

C. $135,000

D. $180,000