Ch. 8 - Business Income - CCA

Question 1

CCA is discretionary, meaning:

Answer 1

The entity can take anywhere from the max to $Nil

Question 2

why not use all CCA in a year:

Answer 2

to create income to use losses, or minimize losses in a year

Question 3

When is an asset available for use:

Answer 3

the earlier of:

1. it is first used by the taxpayer, or
2. the second tax year after it was acquired

Question 4

classes that use straight line:

Answer 4

13 - leaseholds

14 - intangibles

Question 5

UCC calculation:

Answer 5

Opening UCC
\+ Additions
- Disposals
\+ 50% of net additions
= base amount for CCA
- CCA claimed in the year
- 50% of net additions
= Ending UCC

Question 6

Accelerated Investment Incentive

• time frame
• what it does

Answer 6

1. until the end of 2023

2. adds 50% of net additions to CCA base amount (increases deduction in first year)

Question 7

Property excluded from the accelerated investment incentive program:

Answer 7

1. property acquired on a rollover basis
2. property acquired under an amalgamation
3. property acquired from a non-arms length party

Question 8

Recapture arises if:

Answer 8

after additional/disposals to UCC pool, there is a negative balance

Question 9

What recapture means for previous deductions:

Answer 9

There was too much previously deducted

Question 10

What to do when recapture arises:

Answer 10

The amount is added to the UCC pool and to net income for tax purposes

Question 11

Terminal loss arises if:

Answer 11

after additions/disposals to UCC pool, there is a positive balance

Question 12

What terminal losses means for previous deductions:

Answer 12

There was too little previously deducted

Question 13

What to do if terminal losses occur:

Answer 13

The amount is deducted from the UCC pool and deducted from net income for tax purposes

Question 14

CCA Class 1
1.
2.
3.

Answer 14

1. 4% declining; buildings acquired after 1987
2. 6% declining; non-residential buildings acquired after March 2007; must have own class for extra 2%
3. 10% declining; 90% manufacturing buildings acquired after March 2007; must be in separate class for extra 6%

Question 15

CCA Class 3

Answer 15

5% declining; buildings acquired prior to 1988

Question 16

CCA Class 8

Answer 16

20% declining; furniture and fixtures

Question 17

CCA Class 10

Answer 17

30% declining; automotive equipment including passenger vehicles up to $30K

Question 18

CCA Class 10.1

Answer 18

30% declining; passenger vehicle costing more than $30K before tax (included in separate classes)
no recapture or terminal loss rules apply to this class

Question 19

CCA Class 13

Answer 19

straight line based on minimum 5 years; leasehold improvements (included in separate classes)

Question 20

CCA Class 14.1

Answer 20

5% declining; incorporation costs, goodwill, customer lists

Question 21

CCA Class 14

Answer 21

straight line over legal life; patents, franchises

Question 22

CCA Class 50

Answer 22

55% declining; computer hardware and systems software

Question 23

CCA Class 53

Answer 23

50% declining; manufacturing and processing equipment

Question 24

Separate class rule for renal properties

Answer 24

each rental property costing $50K or more must be in in its own CCA class (typically results in recapture)

Question 25

Special tax rule for sale of building and land - when terminal loss on building and capital gain on land:

1. Terminal loss > capital gain
2. Terminal loss < capital gain

Answer 25

1. reduce terminal loss by capital gain and deduct remaining in NI for tax
2. reduce capital gain by terminal loss and include one half of remaining CG in NI for tax