Problem:

A person owns a section of farm land and is cash renting it to a long time neighbour who is not a relative.

Required:

Question 1: Given the land has an adjusted cost base of $200,000, a current market value of $800,000 and the person has a marginal tax rate of 44%, what is the contingent tax liability to the person if he/she sells the land for the market value?

Question 2: What does this person have to do to get the land designated Qualified Farm Property?

Question 3: At what range of values can the person transfer ownership of the land to their grand child?

Question 4: Calculate the contingent tax liability of the 2 extremes stated in c) above for the grand child if he/she has a marginal tax rate of 44%.

Explain in detail and also provide step by step solution.