Set 6 TX CCA

Question 1

Do companies have to take CCA?

Answer 1

No it is discretionary

Question 2

When can CCA be claimed on an asset?

Answer 2

When it is available for use

Question 3

Formula to calculate CCA

Answer 3

UCC at beginning of year 
\+ Cost of acqusitions
- Disposals (lesser of cost and POD)
\+ AII (50% of excess of purchase - disposals)
= base amount for CCA
- CCA taken (above x relevant %)
- AII
= UCC balance end of year

Question 4

Is AII applicable when disposals are higher than purchases?

Answer 4

Nope

Question 5

Is recapture negative or positive UCC balance? Added or deducted from net income?

Answer 5

Negative. Added.

Question 6

Is terminal loss negative or positive UCC balance? Added or deducted from net income?

Answer 6

Positive. Deducted.

Question 7

CCA - special rules - class 10.1

Answer 7

Cars over $30k before tax put in own class. Recapture/Terminal Loss do not apply. Instead you can claim CCA of 1/2 of what would have been claimable upon disposal of asset.

Question 8

CCA - special rules - class 12 and AII

Answer 8

Does not apply to books, chinaware, kitchen utensils, linen etc.

Question 9

CCA - special rules - class 14

Answer 9

Limited legal life - patents. Pro-rated over number of days owned in year. AII is applicable.

• CCA claim in the year of acquisition: (Cost of asset / Legal life) × (Days remaining in the taxation year from acquisition date / Total days in the taxation year) × 1½ (accelerated investment incentive)
• CCA claim in years after acquisition: Cost of asset / Legal life of the asset

Question 10

CCA - special rules - class 53

Answer 10

Manufacturing and processing equipment purchased after 2005 - 100% allowed

Question 11

CCA - special rules - Class 13 Leases

Answer 11

Cost divided by lesser of:

• 5 years
• lease term + 1st renewal

Each lease improvement is treated separately. AII applies.

Question 12

Class 1 - special rules

Answer 12

Can elect to put in separate class. If over 90% manufacturing, can get 10% rate.

Question 13

Separated class elections - two types and why

Answer 13

• electronic equipment over 1k, take advantage of terminal loss rules
• rental property over 50k - each is in own class

Question 14

Sales of land and building - CCA rules

Answer 14

allocate based upon FV of both. If terminal loss on the building and a capital gain on the land,
• Terminal loss > capital gain: Reduce the terminal loss by the amount of the capital gain and deduct the remaining terminal loss from net income for tax purposes.

• Capital gain > terminal loss: Reduce the capital gain by the amount of the terminal loss and include one-half of the remaining capital gain in net income for tax purposes