How to calculate Capital Cost Allowance (CCA) - an example - part three

This is part three of the example about how to calculate Capital Cost Allowance (CCA). Click her for part two.

ABC Inc. purchased one piece of equipment on January 18, 2012 for $12,000. The equipment purchased on December 17, 2011 (see part two) was sold for $5,000 on June 19, 2012. 

What is the maximum CCA for its equipment that ABC Inc. could deduct for taxation year 2012?

We assume ABC Inc. deducted the maximum CCA in 2011.

Undepreciated Capital Cost (UCC) of class 8 as at December 31, 2011 = $49,000 + $20,000 - $11,800 = $57,200 (see part two)

Capital cost (CC) of equipment disposed = $8,000 (see part two)

Proceeds of disposition (POD) of equipment disposed = $5,000

Lesser of CC and POD = $5,000

UCC before CCA = $57,200 + $12,000 - $5,000 = $64,200

Net additions of class 8 in 2012 = $12,000 – $5,000 = $7,000  

50% of net additions = 50% x $7,000 = $3,500 (Half-year rule)

UCC for CCA = $64,200 – $3,500 = $60,700

Maximum allowable CCA = $60,700 x 20% = $12,140

Key points in part three:

  • Disposal of an asset – CC is higher than POD
  • Net additions
  • Half-year rule on positive net additions

 

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