7. Em and Fifty formed a tax consulting partnership on February 1, 2018. Each partner contributed $50,000 in return for an equal share of the profits from the partnership. On January 1, 2022, Fifty sold his interest to Julie for $150,000. The following is the income statement of the partnership:                                                      Em and Fifty                                                  Income Statement For the year ended December 31, 2021 Gross revenue                                                                                                                          $424,400 Expenses:                                                                                                                                          Office expenses                                                                                    $69,000                 Rent                                                                                                           58,300                 Office salaries                                                                                         74,300                 Charitable donations                                                                              10,600                 Amortization (Note 1)                                                                           23,300 Meals and entertainment                                                                       15,000                 250,500                                                                                                                                               173,900 Other income:                 Gain on sale of shares (Note 2)                                                          $84,800                 Dividends from Canadian-resident public corporations                       40,000                 Capital dividends                                                                                    17,000                 141,800                  Net income                                                                                                                                          $315,700 Notes: Capital cost allowance (CCA) for 2021 was $40,300. The capital gain for tax purposes is the same as the financial accounting gain. In 2021, each partner drew $132,000. Prior year financial statements of the partnership provided the following information for the following years ended December 31:  2018                           2019                      2020                 Business income (loss)                      $(70,000)                   $127,300               $159,100                 Taxable capital gains                                        -                       12,800                              -                 Charitable donations                                         -                         4,200                     8,400                 Drawings — Em                                     24,000                       48,000                   60,000                 Drawings — Fifty                                   24,000                       48,000                   72,000   What are the tax implications of the following?   1. What is the partnership income for the year for tax purposes?      2. What is Fifty's share of the partnership income from the year   3. What is Fifty's adjusted cost base (ACB) of the partnership interest immediately before the sale?   4. What is Fifty's taxable capital gain on the disposition of the partnership interest?

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7. Em and Fifty formed a tax consulting partnership on February 1, 2018. Each partner contributed $50,000 in return for an equal share of the profits from the partnership. On January 1, 2022, Fifty sold his interest to Julie for $150,000.

The following is the income statement of the partnership:

 

                                                   Em and Fifty

                                                 Income Statement

For the year ended December 31, 2021

Gross revenue                                                                                                                          $424,400

Expenses:                                                                                                                         

                Office expenses                                                                                    $69,000

                Rent                                                                                                           58,300

                Office salaries                                                                                         74,300

                Charitable donations                                                                              10,600

                Amortization (Note 1)                                                                           23,300

Meals and entertainment                                                                       15,000                 250,500

                                                                                                                                              173,900

Other income:

                Gain on sale of shares (Note 2)                                                          $84,800

                Dividends from Canadian-resident public corporations                       40,000

                Capital dividends                                                                                    17,000                 141,800               

 

Net income                                                                                                                                          $315,700

Notes:

  1. Capital cost allowance (CCA) for 2021 was $40,300.
  2. The capital gain for tax purposes is the same as the financial accounting gain.

In 2021, each partner drew $132,000.

Prior year financial statements of the partnership provided the following information for the following years ended December 31:

 2018                           2019                      2020

                Business income (loss)                      $(70,000)                   $127,300               $159,100

                Taxable capital gains                                        -                       12,800                              -

                Charitable donations                                         -                         4,200                     8,400

                Drawings — Em                                     24,000                       48,000                   60,000

                Drawings — Fifty                                   24,000                       48,000                   72,000

 

What are the tax implications of the following?

 

1. What is the partnership income for the year for tax purposes? 

 

 

2. What is Fifty's share of the partnership income from the year

 

3. What is Fifty's adjusted cost base (ACB) of the partnership interest immediately before the sale?

 

4. What is Fifty's taxable capital gain on the disposition of the partnership interest? 

 

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