To:Accounting Associate

From:Tax Manager

Date:Month XX, Year XX

Subject:Green Proprietorship

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

Effective January 1, 2018, she purchased a health food store. As a part of the purchase price she paid $20,000 for goodwill. She plans to build 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 31^st year end and intends to claim the maximum 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

1. $20,000; and
2. $10,000.

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

This is Canadian Tax Question