This is part two of the example about how to calculate Capital Cost Allowance (CCA).
ABC Inc. purchased two pieces of equipment in 2011. One cost $12,000 and was purchased on March 26, 2011. The other cost $8,000 and was purchased on December 17, 2011.
What is the maximum CCA for its equipment that ABC Inc. could deduct for taxation year 2011?
We assume ABC Inc. deducted the maximum CCA in 2010. That was $1,000.
Undepreciated Capital Cost (UCC) of class 8 as at December 31, 2010 = $50,000 – $1,000 = $49,000 (see part one)
Addition of class 8 in 2011 = $12,000 + $8,000 = $20,000
UCC before CCA = $49,000 + $20,000 = $69,000
50% of addition = 50% * $20,000 = $10,000 (Half-year rule)
UCC for CCA = $69,000 – $10,000 = $59,000
Maximum allowable CCA = $59,000 * 20% = $11,800
The key points in part two:
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- Half-year rule
- Undepreciated capital cost (UCC)