Hugo owns a farm. Both Hugo and his son work on the farm raising sheep. On February
16, 2017 Hugo sold a shearing machine to his son for $5,000. The original cost of the machine
was $10,000, the UCC is $8,000 and the fair market value is $5,000. The machine
was the last asset in its CCA class. On September 1, 2017, his son took the machine to an
auction in another province where an enthusiast bidder paid ,000 for it. The tax consequences
are:
A. Hugo has a terminal loss of $3,000 and his son has a taxable capital gain of $500.
B. Hugo has a terminal loss of $3,000 and his son has recapture of CCA of $1,000.
C. Hugo has a terminal loss of $2,000 and his son has no tax consequences.
D. Hugo has no tax consequences and his son has a terminal loss of $2,000.
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