Opco transferred business assets, including goodwill with a nil CEC and a $1 million FMV to a new subsidiary ("Newco"). The proceeds of disposition of the goodwill were $1,000,000, so that Opco recognized an inclusion of $500,000 under s. 14(1)(b). Under element A of the formula in the CEC definition of CEC, the balance in Newco's CEC account as at December 31, 2003 was $500,000, reflecting a reduction for ½ of such s. 14(1)(b) inclusion.
Newco subsequently made an arm’s length disposition of its goodwill for $1,500,000. What was its s. 14(1)(b) inclusion assuming no other ECP acquisitions or amortization claims?
After reviewing the elements in the formula, CRA concluded that the answer was $250.000.