Question

On September 1 of 2019, Chen Ltd. purchased a franchise for $63000. The franchise has a...

On September 1 of 2019, Chen Ltd. purchased a franchise for $63000. The franchise has a limited life of 6 years. What is the maximum amount of CCA Chen Ltd. can deduct for its 2019 year ended December 31?

Round to the nearest dollar. Do NOT write commas, dollar signs, or decimals in your response.

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Answer #1

Class 14 Capital Cost Allowance includes patents, franchises, concessions, or licences for a limited period. The CCA is whichever of the following amounts is less:

- The total of the capital cost of each property spread out over the life of the property

- The undepreciated capital cost to the taxpayer as of the end of the tax year of property of that class.

Therefore, CCA be claimed for the year 2019 will be to the extend it was used in current year (4 months) spreading cost throughout the life of Franchise (6 years)

CCA for the year ended December 2019 will be

= (63000/6 Years) * 4 Months/ 12 Months

= 3500
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