Question

# In the current year H Ltd., an HST registrant, disposed of a passenger vehicle (cost \$38,000;...

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.

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

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