Question

John Bartel owns land with an adjusted cost base of $250,000 and a fair market value of $320,000. He sells the land to his son for $250,000. Which of the following statements is correct? 83) A) John will have a taxable capital gain of $35,000 and the adjusted cost base of the land to his son will be $320,000. B) John will have a taxable capital gain of $35,000 and the adjusted cost base of the land to his son will be $250,000. C) John will have a taxable capital gain of $70,000 and the adjusted cost base of the land to his son will be $320,000. D) John will have a taxable capital gain of $70,000 and the adjusted cost base of the land to his son will be $250,000

Answer 1

John Bartel will have a taxable capital gain of $70,000 and the adjusted cost base of the land to his son will be $320,000.

Step-by-step explanation:

John Bartel will have a taxable capital gain of $70,000 and the adjusted cost base of the land to his son will be $320,000. Option D is correct.

When John sells the land to his son for $250,000, the fair market value of the land is considered as the proceeds of disposition. The taxable capital gain is calculated as the difference between the proceeds of disposition ($250,000) and the adjusted cost base ($250,000). This results in a capital gain of $70,000.

Since the land is sold at its fair market value, the adjusted cost base of the land to his son will be the same as the fair market value, which is $320,000.