AIT805 Taxation I LN 5-Ch.5 2009 PP Slides

AIT805 Taxation I LN 5-Ch.5 2009 PP Slides - TAXATION II...

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TAXATION II LESSON NOTES 5 (LN) Chapter 5 ___________________________________________________________________ Capital Cost Allowance The following approach is recommended in reviewing this chapter : Read the text 1 , chapter 5. Read the following lesson notes on chapter 5 Practice use of the CCH Tax Research Library, on CD-ROM. Learning Outcomes : Review the learning outcomes for this chapter. The following topics are covered : 1. The Capital Cost Allowance System 2. The “Class” System 3. The Basic CCA Equation 4. Proceeds of Disposition, Recapture, and Terminal Loss 5. Exceptions and Restrictions to the Rules 6. Rental and Leasing Property Restrictions 7. Computers and Electronic Equipment 8. Separate Class for Class 43 Manufacturing Equipment 9. Special Rules for Passenger Vehicles 10. Special Rules for Leases 11. Grants, Subsidies, and Inducements 12. Leasehold Improvements – Class 13 13. Franchises, Patents, and Other Intangibles – Class 14, 44 14. Eligible Capital Property 15. Concluding Concepts to Remember 1. The Capital Cost Allowance System ITA 18(1)(a) provides for a deductions for expenses only if incurred to earn income. ITA 18(1)(b) denies deductions for capital expenditures. GAAP provides for depreciation or amortization of capital expenditures using a variety of method based on the useful life of the applicable asset. The CCA system allows a similar matching system as GAAP, but the assets are grouped into specific classes as specified in ITA REG 1100 and Schedule II . The tax classes are segregated into three specific types of properties: non- depreciable property, depreciable property, and eligible capital property. AIT805 Taxation I: LN 5 - Ch.5 Capital Cost Allowance 5-1
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2. The “Class” System The government places assets in very specific classes that are based primarily on a declining balance rate of depreciation. REG 1100 (1) states the rates applicable to each asset class and Schedule II specify the different classes and the assets placed in each class. The chapter lists the CCA classes included in Schedule II. Like assets are placed in the same class and the total balance of the class referred to the undepreciated capital cost (UCC) balance. The applicable rate stipulated in REG 1100(1) is applied to the UCC
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AIT805 Taxation I LN 5-Ch.5 2009 PP Slides - TAXATION II...

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