Chapter 5 - The Capital Cost Allowance System for Depreciable Property

Question 1

CCA Rate

Answer 1

• The Act assigns various types of assets to specific classes
• Each class has a specific rate attached to it
• This signifies the maximum deductible in a year
• No requirement to claim the maximum:
• You can choose to claim any amount up to the maximum

Question 2

Class 1

Answer 2

• 4%

- building after 1987

Question 3

Class 1 - MB

Answer 3

• 10%
• Used at least for 90% Manufacturing and Production, after March 18, 2007.
• Each building added to this class is put in its own class.

Question 4

Class 1 - NRM

Answer 4

• 6%
• Non-residential building after March 18, 2007.
• Each building added to this class is put in its own class.

Question 5

Class 8

Answer 5

• 20%
• Miscellaneous tangibles such as furniture, fixtures, photocopiers, tools costing more than $500, etc
• You can elect to set up a separate class or each asset costing more than $1,000
  
  • This is transferred back to the original class and pooled after 4 taxation years

Question 6

Class 10

Answer 6

• 30%
• Automobile, van, truck, tractor, wagon, and trailer
• Costing less than $30,000

Question 7

Class 10.1

Answer 7

• 30%
• Passenger vehicles with coast greater than $30,000
• Maximum claim is $30,000 regardless of cost
• Not pooled
• No recapture or terminal loss
  One-half rule:
• Claimable in disposal year

Question 8

Class 12

Answer 8

• 100%

- Tools & instruments cost less than $500, Linen Uniform, Dies, Jigs, Moulds, Computer Software

Question 9

Class 13

Answer 9

• Tenant pays cost of making the rented space suitable to their needs
• Using the straight-line method over the life of the lease plus one renewable period

CCA= the lesser of:

• 1/5 of the cost, and
• Cost / (# of remaining years of the lease + 1st renewal term)

Question 10

Class 14

Answer 10

• Patents, franchises, licenses, etc with a limited life
• CCA is determined separately for each item based on straight line basis
• CCA = Cost * (# of days owned in the year / total # of days in the year)
• Can not exceed 40 months

Question 11

Class 44

Answer 11

• 25%

- Patents and rights to use patents

Question 12

Class 50

Answer 12

• 55%

- Computer and system software after March 18, 2007

Question 13

Class 29

Answer 13

• 50%

- Manufacturing machinery and equipment after Mar 18, 2007 and before 2016

Question 14

Class 53

Answer 14

• 50%

- Manufacturing machinery and equipment after 2015 and before 2026

Question 15

Class 43

Answer 15

• 30%

- Manufacturing machinery and equipment not in classes 29 and 53

Question 16

Pooling Asset of the Same Class [13(21)] and One-half Rule [1100(2)]

Answer 16

• The one half rule applies only on net additions
• If disposals exceed purchases, no one-half rule
• When assets are sold, the CCA pool is reduced by lower of:
  Original cost or
  Proceeds of disposition

Question 17

Accelerated CCA

Answer 17

• For most declining balance classes, the CCA will be 150% for net additions
• The accelerated CCA is temporary, applies to depreciable properties acquired after November 20, 2018 and before 2024
• This is not applicable for previously used personal property purchased from a non-arm’s length person. - - In this cases the half-year rule should be used
  It applies to both assets using the straight line method and declining balance method

Question 18

Format for Calculating Ending UCC

Answer 18

Opening UCC
\+New Purchase
- Disposition
- CCA
Ending UCC

If ending UCC is negative this is a recapture and is added to income
If ending UCC is positive but there are no property in the account this is a terminal loss and is subtracted from income

Question 19

Gain/Loss on Disposition

Answer 19

Gains/losses can occur at three points:

• Terminal Loss [20(16)]
• Recapture [13(21)]
• Capital Gain

Question 20

Terminal Loss [20(16)]

Answer 20

• Positive balance in the class, and
• All assets are disposed of
• This will be an additional deduction

Question 21

Recapture [13(21)]

Answer 21

• Negative Balance left in the class
• Regardless of whether there are assets left
• Included in income

Question 22

Capital Gain

Answer 22

-Selling price exceeds the original cost

Question 23

Class 14.1

Answer 23

• Capital Property (After 2016)
• Intangible nature, unlimited life
  Some common types:
• Goodwill (purchased)
• Franchises, licenses and concessions with no legal -limited life
• Trademarks
• Customer list
• Incorporation costs
• CCA rate is 5%
• Follow the standards CCA process
• Eligible capital properties acquired before 2017 are automatically transferred to Class 14.1 on January 1, 2017