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Question #7Marilyn Fox owns a large piece of land that she acquired several years ago for $85,000
Question #7Marilyn Fox owns a large piece of land that she acquired several years ago for $85,000. For several years, she hasbeen using the property to run a high security parking lot operation. On January 1, 2019, she gives the property toher common-law partner Ellen Degen. At this time, the fair market value of the land is $170,000. Marilyn does notelect out of ITA 73(1).During 2019, Ellen continues the parking lot operation, which produces a net business income of $8,500. OnJanuary 1, 2020, Ellen sells the parking lot for $190,000.What are the tax consequences of these events for Marilyn and Ellen during 2019 and 2020? If there are no taxconsequences for either individual in a given year, you should clearly state this fact in your answer
Expert Solution
The tax consequences for Marilyn and Ellen in each of the two years would be as follows:2019 For Marilyn There would be no tax consequences for Marilyn.2020 For Marilyn When Ellen sells the land, the taxable capital gain of $52,500 [(1/2)($190,000 -$85,000)] would be attributed back to Marilyn.2019 For Ellen The $8,500 in income from the parking lot operation would be included in Ellen’s NetIncome For Tax Purposes. As this is business income, there would be no attribution.2020 For Ellen As the taxable capital gain is attributed to Marilyn, there would be no tax consequencesfor Ellen
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