RSM324H1 Chapter Notes - Chapter 6: Capital Asset, Capital Cost, Full Rate
Document Summary
Chapter 6: the acquisition, use, and disposal of depreciable property. The timing of deductions for the cost of long-term assets (ppe) is critical because they will increase cash flow by reducing the amount of tax paid in the particular year. Normal accounting for amortization requires estimates of: useful life of an asset, salvage value of the asset, contribution to the business each year of the useful life of the asset. Capital assets are separated into two general categories: depreciable capital property. Contains mainly tangible assets such as equipment. Allocation of the cost is called cca: eligible capital property. I. e. purchased goodwill, incorporation costs, and unlimited life franchises/licences. Cca = (opening balance in asset class + purchases disposals)*cca rate. Individuals/corporations qualify for cca (capital assets have to have been acquired for the purpose of producing income). Taxpayers who carry on a business or use assets to earn investment income can claim cca on a number of different types of assets.
