Question 2 UR Inc is a trucking company who purchased land in Halifax at a cost of $5 million dollars, representing 23 acres of land. The owner of the company, Mr. Rose, is looking to relocate the Cape Breton company to Halifax in the future to this new site, perhaps build a new premises on this site sometime over the next 2-3 years. When the pandemic hit he believes his plans may change. However, he is very fortunate as it turns out that the purchase price of the land was a very favorable deal from the company and he is being told that if he does not relocate he could easily sell the land for a nice profit. Late in 2020, he wanted to reduce his risk so he decided to sell 10 acres at a price of $3,500,000 and he will keep the 13 acres left for a future move. In order to facilitate the sale, UR takes back a $3.0 million first mortgage on the property. The mortgage will be repaid in 4 annual instalments of $750,000 each, beginning in 2021. UR now is getting ready to determine the income inclusion from this transaction as he has been told that it may be determined that the land sale would result in business income rather than capital gain income. Required: UR has sought your advice as the appropriate tax treatment of the sale transaction. Provide the required advice as to the proper income treatment and what the taxable income difference would be under each scenario. Question 2 UR Inc is a trucking company who purchased land in Halifax at a cost of $5 million dollars, representing 23 acres of land. The owner of the company, Mr. Rose, is looking to relocate the Cape Breton company to Halifax in the future to this new site, perhaps build a new premises on this site sometime over the next 2-3 years. When the pandemic hit he believes his plans may change. However, he is very fortunate as it turns out that the purchase price of the land was a very favorable deal from the company and he is being told that if he does not relocate he could easily sell the land for a nice profit. Late in 2020, he wanted to reduce his risk so he decided to sell 10 acres at a price of $3,500,000 and he will keep the 13 acres left for a future move. In order to facilitate the sale, UR takes back a $3.0 million first mortgage on the property. The mortgage will be repaid in 4 annual instalments of $750,000 each, beginning in 2021. UR now is getting ready to determine the income inclusion from this transaction as he has been told that it may be determined that the land sale would result in business income rather than capital gain income. Required: UR has sought your advice as the appropriate tax treatment of the sale transaction. Provide the required advice as to the proper income treatment and what the taxable income difference would be under each scenario
