CCA rules Flashcards
CCA
the capital asset must be in a prescribed pool or class, and always use declining balance method unless stated otherwise.
Only assets “put into use”, may enter the pool in any year
ITC (investment tax credit)
ITC must be deducted from the Capital Cost (CC) of the asset
CC(Capital Cost)
Purchase price plus relevant costs such as transportation & installation if any.
Rule 1:
(The 150% rule)
A rate of one-and-a-half times applies to net capital property additions in the year an asset is put into use. And then deducted after taking the CCA to arrive at the UCC.
Rule 2:
Pertains to sales of assets from the pool. We deduct from the pool the lesser of (original cost or proceeds from sale).
Rule3:
( Net Acquisition Rule) Put in use & sell assets in the same class in the same year.
CC new -lesser of ( CCold or Net Proceeds from sale)
If net acquisitions are positive, we apply the 150% rule. If net acquisitions are negative, the 150% rule does not apply.
CCA charge for any year
CCA charge for any year = UCC + Transactions) × CCA rate. This goes into the deprecation expense and is deducted from UCC beginning to get the UCC ending.
0 Physical assets left in pool
When there are no physical assets left in the pool, it must be terminated; a positive UCC is a terminal loss and reduces taxable income in that year. A negative UCC is a recapture and increases taxable income in any year it occurs.
Capital Gains:
In Canada, only 50% of the total capital gains is taxable at the marginal tax rate and claimed as boosting income in the year they occur.
Capital Loss:
It is only available on non-depreciable assets (stocks, bonds, land) and reduces capital gains.
If there is a capital loss, calculate the NET CAPITAL GAINS (Capital gains - capital loss) × 50%. If this is negative, there is no impact
