ADMS 3520 Chapter Notes -Capital Cost Allowance, Income Tax

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Published on 9 Aug 2012
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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

Document Summary

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: year rule, recaptured cca, terminal loss, prorate cca for short years, capital gain if asset sold for more than original cost. In year of purchase, of regular cca is deducted. Year adjustment is made in column 7 of cca schedule. (additions disposals) (use nil if amount is negative) 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. When an asset is sold for an amount greater than the. 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.