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8 Pages

Course Code
ECON 4400

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Chapter 7 – Capital Cost Allowance - amortization expense for Income tax purposes - it is different from accounting rules - the amount calculated is the maximum CCA - it does not need to be deducted if taxpayer does not want to deduct it Capital Cost Allowance Important Rules 1) Different Classes & Rates 2) ½ year rule 3) Recaptured CCA 4) Terminal Loss 5) Prorate CCA for short years 6) Capital Gain if asset sold for more than original cost ½ Year Rule - in year of purchase, ½ of regular CCA is deducted - ½ year adjustment is made in column 7 of CCA schedule. ½ (Additions – Disposals) (use NIL if amount is negative) Terminal Loss - when an asset is sold for an amount less than its undepreciated capital cost, and all the assets of the class are disposed of - a terminal loss is fully deductible in year of disposal - the difference between the proceeds and UCC is the amount of the terminal loss Recaptured CCA - when an asset is sold for an amount greater than the UCC in the class - the difference between the proceeds and the UCC is taxable income called “recaptured CCA” - it is not necessary to sell all assets in the class Class 12 – 100% - includes applications computer software (not system software) - includes books in lending library, dishes, cutlery, jigs, dies, patterns, uniforms, linen, motion picture films, video tapes, dental & medical instruments, and tools costing less than $200 - 100% write off in first year except for Certified Canadian Films, computer software, and rental video cassettes which have the ½ year rule Leasehold Improvements – Class 13 -
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