Question

In the current year H Ltd., an HST registrant, disposed of a passenger vehicle (cost $38,000; UCC $22,000) for $16,000. At the same time H purchased a new passenger vehicle for $46,000 plus HST. What is the maximum CCA deduction that H can claim in the current year? Note: Do not place a minus sign in front of the amount.

Answer 1

SOLUTION:

Since the vehicle has been acquired for more than $ 30,000, it is to be included in Class 10.1 of depreciable properties.

The maximum capital cost to be included in Class 10.1 is $30,000 + HST.

Depreciation recapture and terminal losses are not allowable under Class 10.1.

Also since the same year a new vehicle has been purchased, the 50% rule is applicable as well as half year CCA rule.

The rate of CCA for class 10.1 is 30%.

CCA allowable on disposed Vehicle:

= UCC * Rate of CCA

= 22,000* 0.15

= $ 3300

CCA allowable on newly purchased vehicle:

= Cost * 30% * 6/12 months

= $ 30,000 *0.30* 6/12 (since capital cost allowed for cca purpose is limited to $ 30,000 + HST under class 10.1 asset)

= $ 4500

Thus, maximum CCA H can claim in the current year = $ 3300 + $ 4500 = $ 7800