Chapter 5 - The Capital Cost Allowance System for Depreciable Property Flashcards
CCA Rate
- 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
Class 1
- 4%
- building after 1987
Class 1 - MB
- 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.
Class 1 - NRM
- 6%
- Non-residential building after March 18, 2007.
- Each building added to this class is put in its own class.
Class 8
- 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
Class 10
- 30%
- Automobile, van, truck, tractor, wagon, and trailer
- Costing less than $30,000
Class 10.1
- 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
Class 12
- 100%
- Tools & instruments cost less than $500, Linen Uniform, Dies, Jigs, Moulds, Computer Software
Class 13
- 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)
Class 14
- 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
Class 44
- 25%
- Patents and rights to use patents
Class 50
- 55%
- Computer and system software after March 18, 2007
Class 29
- 50%
- Manufacturing machinery and equipment after Mar 18, 2007 and before 2016
Class 53
- 50%
- Manufacturing machinery and equipment after 2015 and before 2026
Class 43
- 30%
- Manufacturing machinery and equipment not in classes 29 and 53
Pooling Asset of the Same Class [13(21)] and One-half Rule [1100(2)]
- 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
Accelerated CCA
- 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
Format for Calculating Ending UCC
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
Gain/Loss on Disposition
Gains/losses can occur at three points:
- Terminal Loss [20(16)]
- Recapture [13(21)]
- Capital Gain
Terminal Loss [20(16)]
- Positive balance in the class, and
- All assets are disposed of
- This will be an additional deduction
Recapture [13(21)]
- Negative Balance left in the class
- Regardless of whether there are assets left
- Included in income
Capital Gain
-Selling price exceeds the original cost
Class 14.1
- 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
