Accounting Depreciation vs. Capital Cost Allowance for Tax•In calculating business income:–ITA 18(1)(b) disallows the deduction of capital outlays and expenses except as expressly permitted in the Act.•The act considers accounting based depreciation to be the deduction of capital outlays, so it is not deductible–ITA 20(1)(a) allows the deduction of capital cost allowance based on the detailed rules found in the Regulations. •The result is that when calculating business income, we have to start with accounting income, add back depreciation and deduct capital cost allowance.•As you will learn, there are many other adjustments to accounting income as well
TerminologyAccountingTaxAcquisition costCapital cost, Adjusted Cost Base (ACB)Amortization or depreciation expenseCapital cost allowance (CCA)Net book value (NBV)Undepreciated capital cost (UCC)
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