Depreciable Capital Property Eligible Capital Property Chapter 5

1
Depreciable Capital PropertyEligible Capital
PropertyChapter 5
2
Automobiles used in employment or business

• Class 10.1 Automobiles
• 30,000 plus GST PST limit on capital cost
• Each automobile placed in separate Class 10.1
• Recapture and Terminal Loss not applicable
• In year of disposition special CCA calculation
• ½ of CCA that would have been allowed on
  automobile had it not been disposed of (Reg.
  1100(2.5))
• Class 10 Automobiles
• Capital Cost less then 30,000 plus GST PST
• Recapture and Terminal loss rules apply except to
  an employee
• Employee not able to deduct terminal loss from
  employment income but must include recapture

3
Class 8 or Class 10 Separate Classes

• May place the following specified properties into
  a separate class
• General purpose electronic data processing
  equipment and systems software, paragraph f of
  Class 10
• Computer software, presumably systems software
  for electronic process control or monitor
  equipment and electronic communications control
  equipment, normally classified in Class 8
• A photocopier, normally included in Class 8
• Electronic communications equipment such as fax
  machine or telephone equipment, normally included
  in Class 8
• Must have capital cost of at least 1,000

4
Class 13 Leasehold Improvements

• CCA after the first year of ownership is lesser
  of
• 1/5 of the capital cost of the leasehold interest
• The capital cost of the leasehold interest
  divided by the number of months in the remainder
  of the lease term plus one renewal option divided
  by 12.
• CCA in first year would be ½ of the above amount

5
Class 14 Limited Life Intangibles

• Straight-line CCA based on remaining legal life
• No half-year rule
• Includes limited life patents, franchises,
  concessions, or licences
• If patent purchased after April 26, 1993, patent
  must be included in Class 44 (25)
• Taxpayer may elect to claim under Class 14 rather
  than Class 44 Reg. 1103(2h) (Note Class 44
  is only for patents!)

6
Costs of Representation

• Expenses of representation may be
• An immediate deduction of the cost par.
  20(1)(cc),
• A deduction of the cost over a 10 year period
  ssec.20(9) or
• Capitalized to the cost in the appropriate CCA
  class (14 or 44) or in ECE pool

7
Capital Cost Reduction for Cost Assistance

• Assistance received reduces capital cost so CCA
  is claimed on net cost
• Assistance includes grants, subsidies, forgivable
  loans, deduction from tax, investment allowances
  and other assistance

8
Eligible Capital Property

• Include purchased goodwill, franchises with
  indefinite lives and incorporation costs among
  others
• ¾ of expenditure is added to cumulative eligible
  capital CEC account
• Amortized par. 20(1)(b) using a max. rate of 7
  referred to as cumulative eligible capital amount
  (No half-year rule!)

9
Eligible Capital Property

• Proceeds of Disposition ¾ deducted from CEC
  balance
• If balance of CEC is negative, for any taxation
  year after October 17, 2000, take into business
  income
• (i) the lessor of
• (A) the negative balance, and
• (B) all cumulative eligible capital amounts
  claimed in prior years less deductions
  previously recaptured in prior year
• PLUS
• (ii) 2/3 of the negative CEC balance less CEC
  amounts claimed in
• prior years
• If CEC balance is positive, but the business has
  been terminated, take the positive balance as a
  deduction (i.e. terminal loss)

10
Eligible Capital PropertyElection Capital Gain

• Additions and reductions to CEC account are done
  at ¾ but capital gain rate is ½
• Option to elect to treat a gain on disposition of
  eligible capital property as a capital gain if
• Property disposed must be eligible capital
  property of a business, but not goodwill
• Cost of property must be determinable
• Proceeds of disposition must exceed the cost.
• Taxpayers exempt gains balance must be NIL
• Must elect under s.14(1.01) in taxpayers tax
  return