IFITC Chapter_5

IFITC Chapter_5 - Chapter 5 Depreciable Property and...

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Chapter 5 Depreciable Property and Eligible Capital Property
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CCA System Expenses deductible if incurred to earn income capital property usually provides future benefit over several periods. Amortization (GAAP) vs. CCA (Tax) Amortization is mandatory and uses useful life CCA and CECA is optional but specific and leaves few, if any, alternative choices in calculation
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CCA System Types of capital property Non-depreciable capital property Depreciable Property Eligible Capital Property Other considerations CCA and neutrality CCA and tax planning
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CCA System Eligibility for CCA Depreciable property – exclusions Property, the cost of which is deductible in computing income; Property that is described as inventory; Property not acquired for the purpose of gaining or producing income; Property that is a yacht, camp, lodge, golf course or facility for which expenses are not deductible by reason of par. 18(1)( f ); Land; and Property situated outside Canada that is owned by non- residents.
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CCA System Eligibility for CCA Employees – generally prohibited Businesses – generally allowed
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Basic Rules of CCA UCC of the class at the beginning of the year $ xxx Add: purchases during the year xxx Deduct: dispositions during the year at lesser of: (a) Capital Cost $ xxx (b) Proceeds of disposition $ xxx (xxx) UCC before adjustment $ xxx Deduct: ½ net amount (xxx) UCC before CCA $ xxx Deduct: CCA for the year (xxx) Add: ½ net amount xxx UCC at the end of the year $ xxx
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Basic Rules of CCA Half-year rule Attempt by the Act to adjust for length of time in the year that an asset is owned in year of purchase/disposition “1/2 net amount” in calculation Purchases during the year $ xxx Deduct: less of capital cost and proceeds of disposition (xxx) Net amount (positive only) $ xxx
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Basic Rules of CCA Exhibit 5-2 Common Property not Affected by the Half-Year Rule Class Paragraph Property 12 ( a ) A book that is a part of a lending library ( b ) Chinaware, cutlery, or other tableware ( c ) Kitchen utensil costing less than $200 ( e ) Medical or dental instrument costing less than $200 ( g ) Linen ( h ) Tool costing less than $200 [$500 proposed by the May 2,
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IFITC Chapter_5 - Chapter 5 Depreciable Property and...

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