On May 1, 2023, AB Corporation acquired 100% of the shares of CD Ltd. Both corporations provide online music lessons. Prior to the acquisition, CD has the following assets:
Cost
UCC
FMV
Marketable Securities
$ 100,000
$ -
$ 250,000
Inventory
$ 100,000
$ -
$ 60,000
Land
$ 125,000
$ -
$ 115,000
Building (class 4)
$ 140,000
$ 95,000
$ 120,000
Instruments (class 8)
$ 70,000
$ 48,000
$ 45,000
CD had non-capital losses of $80,000 and net capital losses of $15,000 on December 31, 2022. CD also incurred additional losses from regular business operation of $10,000 during January to April 2023.
REQUIRED:
A. What are the available non-capital and net capital loss balances of CD Ltd. on April 30, 2023.
B. If CD Ltd. makes the elections(s) necessary to utilize the losses that would expire on the acquisition of control, indicate the asset(s) on which the election should be made and the amount that should be elected.
Note:
You are required to show the full calculation (including the applicable components) in order to earn full marks
You are not required to reference legislation in Income Tax Act
