Reference no: EM132993468

Question - Billy Anderson died three years ago. At the time of his death, a depreciable asset was transferred from his estate to a qualifying spousal trust that was created on his death. The UCC balance in the class at that time was $140,000. The asset had an original capital cost of $140,000 and it was the only asset in its class. At the time of Billy's death, the asset had a fair market value of $200,000. Since that time, the trust has claimed CCA on the asset of $40,000. At the end of the current year, the asset is sold to an arm's length party for $250,000.

Required - Determine the tax consequences of the transfer of the asset to the spousal trust and of the disposition of the asset by the trust. Also determine the maximum amount of trust income that can be allocated to Billy's spouse from the sale.