FACC 300 Lecture Notes - Lecture 7: Taxation In Canada, Capital Expenditure
30 Nov 2017
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Determine the capital tax factor for a class 24 asset with a tax rate of 45% and an interest rate of 12%. Class 24 is defined as straight-line depreciation at a rate of 50% a year. The word class" refers to the canadian tax system, which means the half-year rule applies. Thus, the depreciation schedule becomes yr1: 25%, yr2: 50%, yr3: 25% If a class 24 asset is purchased for 000 and is then resold for . 50 percent of capital gains are taxable at the normal rate. Use a tax rate of 45% and an interest rate of 12%. The capital expenditure is to be depreciated by the declining-balance method at an annual rate of 30 percent and the corporate income tax rate is 50 percent. A machine cost 000, has annual operating expenses of 000, and a salvage value of 000 at the end of a useful life of 8 years.
