CCA-slides

CCA-slides - Tran Chung Capital Cost Allowance and...

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Tran Chung Capital Cost Allowance and Cumulative Eligible Capital INTRODUCTION Paragraph 18(1)(b) prohibits the deduction of capital expenditures; however, paragraph 20(1) (a) allows a taxpayer to deduct an amount with respect to the capital cost of property to the extent allowed by the Income Tax Regulations. The myriad of factors to be considered in determining a CCA claim are discussed below under three major headings: 1.eligibility for inclusion in CCA classes, 2.calculation of CCA, and 3.restrictions on CCA claims. © 2010 Tran Chung 1
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ELIGIBILITY FOR INCLUSION IN CCA CLASSES Capital expenditures generally produce an enduring benefit depreciate the asset over time. Property must be included in the regulations in order to be eligible for CCA. No CCA is allowed for land, inventory and certain Property must be acquired for purpose of gaining or producing income before CCA can be taken. Goodwill and other intangibles are entitled to a tax writeoff as eligible capital expenditures (discuss later). © 2010 Tran Chung 2
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Major Classes that will be covered in Class Class 1 – building (4%) Class 3 – building pre-1988 (5%) Class 8 – various machinery, equipment and furniture (20%) Class 10 – Vehicles and other (30%) Class 10.1 – “Luxury” cars (30%) Class 12 – computer software and small assets (100%) Class 13 – leasehold improvements (straight-line) Class 14 – limited life intangibles (straight-line, no half year rule) Class 43 – manufacturing and processing assets (30%) Class 44 – patents (25%) Class 45 – computer hardware and systems software (45%) Ownership An asset can generally be included in a CCA class only when the taxpayer has acquired a capital property or a leasehold interest in capital property for the purpose of gaining or producing income. The taxpayer will generally be considered to have acquired a depreciable property at the earlier of: 1.the day on which the taxpayer obtains title to it and 2.the date on which the taxpayer has all the incidents of title, such as possession, use, and risk. © 2010 Tran Chung 3
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Available-for-Use Rules The timing of the inclusion of an asset in the UCC of a class is also affected by the “available-for-use rules”. These rules, contained in subsections 13(26) to (32), prevent the taxpayer from claiming CCA until the time the property is “available for use.” © 2010 Tran Chung 4
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A B C D= A+B-C E = ½ x (B-C) F= D – E G H = F x G I = D - H Year Beg UCC Additions Dispositions UCC For Year ½ Year Rule Reduced UCC CCA Rate Max CCA End UCC
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This note was uploaded on 11/03/2010 for the course COMM 355 taught by Professor Trancheung during the Winter '10 term at UBC.

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CCA-slides - Tran Chung Capital Cost Allowance and...

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