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Unformatted text preview: WEEK 4 CAPITAL COST ALLOWANCE (CCA )- Chapter 5 1. General ITA 18(1)(b) prohibits a deduction for capital costs, however, I TA 20(1)(a) allows a deduction for the capital cost of property if it is permitted by an Income Tax Regulation (ITR) , See Part XI , Regulation 1100 and ITR Schedules II through VI . Note : Reg 1100 establishes rules , whilst, ITR Schedule II provides for a description of which assets are allocated to each class and relevant rates for the classes- see E&Y’s 2010 Federal Income Tax Act- 8 th Edition - pages 2071-2092 SUMMARY I Acquisitions of Capital Assets – added to the undepreciated capital cost (UCC) balance of the class (ie, a class is a particular category or pool of assets) that is best described and defined by the Regulations. II Disposals of Capital Assets – proceeds of disposition (POD) are deducted from the UCC balance of the class which previously contained the disposed asset, which could cause tax consequences III Capital Cost Allowance (CCA ) – maximum CCA is determined by applying the rate that is prescribed to a particular class of assets, to the UCC balance (ie, the pool) as at the year-end (ie, declining balance amortization) or in some cases, to the original cost of the assets (ie, straight line amortization). NOTE: CCA can be different from depreciation expense calculated on the same asset, under Generally Accepted Accounting Principles(GAAP) I. ACQUISTION OF CAPITAL COSTS 1. General Rules As at year-end, the asset must be owned (ie, title) by the taxpayer and used for the purpose of producing income from a business or property (ie, fixed assets) and not held only for resale (ie, inventory) or used in the manufacturing of goods for sale , or used in the repair of fixed assets ....
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This note was uploaded on 01/24/2011 for the course ACCO 330 taught by Professor Mastromonaco during the Fall '10 term at Concordia Canada.
- Fall '10