Ch. 7 - Business Income

Question 1

Some typical add-backs for tax purposes:

Answer 1

1. interest / penalties on income tax payments;
2. amortization;
3. Recapture of CCA;
4. Accounting losses on capital asset disposals
5. taxable capital gains
6. donations
7. M&E expenses
8. carrying charges on vacant land (added to cost of land)

Question 2

Some typical items to deduct for tax purposes:

Answer 2

1. terminal losses;
2. financing costs
3. accounting gains on disposals of assets
4. allowance capital losses
5. cash paid for warranty expenditures

Question 3

recapture:

1. what is it
2. what do you do with it

Answer 3

1. when UCC class is below $Nil after additions and disposals
2. amount to bring difference below $Nil back to $Nil is added to income

Question 4

Terminal loss:

1. what is it
2. what to do with it

Answer 4

1. when UCC class is above $Nil after additions and disposals
2. amount to bring difference above $Nil back to $Nil is deducted from income

Question 5

Class 1

Answer 5

4% declining - buildings after 1987
(4+2%) declining non-residential buildings acquired after 2007
(4+6%) declining balance MFG buildings used at least 90% for MFG acquired after 90%

Question 6

Class 10.1

Answer 6

30% declining passenger vehicles over $30k before tax. included in separate classes. no recapture or terminal loss applies

Question 7

Class 10

Answer 7

30% declining automotive equipment, passenger vehicles up to $30k before taxes

Question 8

Class 8

rate and items

Answer 8

20% declining furniture & fixtures, office equipment

Question 9

Class 13

rate and asset

Answer 9

straight line leasehold improvements. Added to a new class each year. the lesser of 5 years and the number of years left in the lease

Question 10

Class 14

Answer 10

patents, franchises. those with limited lives are added to a new class. amortized over its useful life

Question 11

Class 50

rate and assets

Answer 11

55% declining

computer hardware and systems software acquired after 2017

Question 12

class 53
rate and asset

Answer 12

50% declining

MFG and processing equipment

Question 13

CCA starts at the earlier of:

Answer 13

1. the asset being put to use

2. the second tax year following acquisition

Question 14

Three common ways to see a shortened tax year

Answer 14

1. The start of a business
2. The cessation of a business
3. acquisition of control