Question

On January 1, 2019 Bob McDonald entered into an eight year lease for office space. During 2019, Bob spent $60,000 improving the building. In 2021, he spent an additional $30,000 on improvements and in 2024, he spent $20,000 on improvements. Calculate the amount of CCA that can be claimed over the next 8 years. The lease expired on January 1, 2027

Answer 1

Solution:

CALCULATION OF CAPITAL COST ALLOWANCES FOR 8 YEARS

Years	2019 Spending Allocation	2021 Spending Allocation	2024 Spending Allocation	Total CCA
2019	7500			7500
2020	7500			7500
2021	7500	5000		12500
2022	7500	5000		12500
2023	7500	5000		12500
2024	7500	5000	6666.67	19166.67
2025	7500	5000	6666.67	19166.67
2026	7500	5000	6666.67	19166.67

Note:

1) Leasehold Improvement are to be amortized on straight line basis over the lease life from the date of improvement.

2) Leasehold Improvement are sometimes subjected to half year rule which means if the Leasehold Improvement is done in the middle of the year, then capital cost allowances will be 50% of such year total allowances (No such thing is mentioned in the question in relating to, on which date that the improvements are made).