raig owns a piece of land that he’d like to use in a new business. He will transfer the land into a newly formed corporation using Section 85. The land has an ACB of $4,000 and a FMV of $7,000. If he takes back shares of the corporation and a note payable for $2,000 as consideration, what is the ACB of the shares he takes back? Assume he elects to defer as much tax as he can.   Answer options:   4,000   7,000   2,000   5,000   6,000

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Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.