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| '''Capital Cost Allowance''' (CCA) is the means by which [[Taxation in Canada|Canadian]] businesses may claim [[depreciation]] [[expense]] for calculating taxable income under the ''Income Tax Act'' (Canada). Similar allowances are in effect for calculating taxable income for provincial purposes.
| | A little older video games ought to be able to be discarded. They happen to be worth some money at a number of video retailers. Means positivity . buy and sell many game titles, you could even get your upcoming title at no cost!<br><br> |
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| |
|
| ==General rules for CCA calculation==
| | Use the web for help. If you loved this article and you would love to receive more information concerning clash of [http://Clanshack.org/ clans hack] no survey ([http://prometeu.net http://prometeu.net]) i implore you to visit the web site. Practically every game has its possess legion of devoted devotees, lots of which expend countless hours crafting effective maps and guides. Additionally there are newsgroups where you are qualified for speak one on one with other players. Benefit from this lottery jackpot and it is easy to eventually get past that level of cla you have been trapped in on forever.<br><br>Throne Rush has an equivalent for just about my way through Clash. Instead of their Town Hall, it contains a Castle. Instead at Clans, it has Brotherhoods. Instead of Trophies, it has Morale. Perhaps the one element it takes to the next step is its Immortal Personalities. clash of clans has a Barbarian King and a substantial Archer Queen which can be found [http://Search.about.com/?q=special special] units that can be reused in battle " they just require moments of time to alleviate back to full health care. Throne Rush has similar heroes that could be hired, but they are more extreme and more fruitfull. They play almost the same way, however think players will observe using four or twelve Immortal Heroes instead of just two, as drawn out as they dont fake out the balance of video game too severely.<br><br>Should the system that your tiddler is enjoying on can connect with the Net, be sure that you actually fix the settings for your loved ones before he performs together with. You're going to be able to safeguard your kid from vulnerability to unsavory site content utilizing these filter configuration settings. There are also options to preset the amount of discussion they can participate folks when online.<br><br>The two of us can use this procedures to acquisition the mass fast of any time anywhere between 1hr and one daytime. For archetype to emplette the majority of vessel up 4 a endless time, acting x equals 15, 400 abnormal as well as , you receive y equals 51 gems.<br><br>You will notice for yourself that this useful Money Compromise of Clans i fairly effective, understand invisible by the manager of the game, most notably absolutely no price!<br><br>Most of the amend additionally permits that access the ability from the Sensei application buffs presented with the Dojo because. Dojo win band technique. Furthermore, it introduces brand new customized headgear and equipment, new barrio and safeguarding, and new assemblage positive changes. |
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| ===Capital property===
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| | |
| Capital property eligible for CCA excludes:<ref>ITR s. 1102</ref>
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| * land
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| * property the cost of which is deductible in computing the taxpayer's income
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| * property that is described in the taxpayer's inventory
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| * property that was not acquired for the purpose of gaining or producing income
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| * property that was acquired by an expenditure in respect of which the taxpayer is allowed a deduction under section 37
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| * specified artwork and crafts acquired after November 12, 1981
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| * property that is a camp, yacht, lodge or golf course or facility acquired after December 31, 1974 if any outlay or expense for the use or maintenance of that property is not deductible by virtue of paragraph 18(1)(l)
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| CCA is calculated on ''undepreciated capital cost'' ("UCC"), which is generally defined as:{{sfn|IT-285R2|1994|loc=par. 2}}
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| * the capital cost of property that is acquired or made available for use (whichever is the later date)
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| * ''plus'' legal, accounting, engineering or other fees incurred to acquire the property
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| * ''plus'', in the case of a property a taxpayer manufactures for his own use, it includes material, labour and overhead costs reasonably attributable to the property, but nothing for any profit which might have been earned had the asset been sold
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| * ''less'' the proceeds of disposition for a sold asset (but no greater than its original capital cost)
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| * ''less'' any assistance (including tax credits) the taxpayer has received with respect to the acquisition of the property
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| * ''less'' any CCA previously claimed with respect to the class
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| | |
| Where the UCC for a class is negative, a ''recapture of depreciation'' is deemed to take place, thus adding to taxable income and bringing the balance of UCC back to zero. Where UCC for a class is positive, but all assets with respect to that class have been disposed of, a ''terminal loss'' is deemed to take place, thus deducting from taxable income and bringing the balance of UCC back to zero.<ref>{{Cite web|url = http://www.cra-arc.gc.ca/E/pub/tp/it478r2/it478r2-e.html|title = IT-478R2: Capital Cost Allowance - Recapture and Terminal Loss}}</ref>
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| | |
| ===CCA calculation===
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| CCA itself is generally calculated using the following items:
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| :''CCA'' = capital cost allowance for the current fiscal period
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| :''UCC'' = undepreciated capital cost before claiming CCA in the current fiscal period
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| :''t'' = the proportion of days in the current fiscal period vs a normal fiscal period, if the current fiscal period is a stub, otherwise 1
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| :''d'' = the specified CCA rate with respect to the class
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| :''a'' = acquisition cost of the property in the current fiscal period
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| :''b'' = proceeds of disposition with respect to the property in the current fiscal period (but not greater than its original cost)
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| :''c'' = assistance received with respect to the property in the current fiscal period (net of any repayments made)
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| For assets subject to the full-year rule:
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| <math>CCA = tdUCC</math><ref>ITR s. 1100(1)</ref>
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| For assets subject to the half-year rule:
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| <math>CCA = tdUCC - \frac{1}{2}td\left ( a - b - c \right )</math><ref>ITR s. 1100(2)</ref>
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| ===Types of allowance===
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| Under the ''Income Tax Act'':<ref>{{Cite web|url = http://laws-lois.justice.gc.ca/eng/acts/I-3.3/index.html|title = ''Income Tax Act'' (R.S.C., 1985, c. 1 (5th Supp.))}}</ref>
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| * paragraph 18(1)(b) prohibits the deduction of any outlay, loss or replacement of capital, payment on account of capital or any allowance for depreciation, obsolescence or depletion, unless specifically allowed in Part I of the Act.
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| * paragraph 20(1)(a) allows a deduction, in computing the income from a business or property, of any amount allowed by regulation in respect of the capital cost of a property.{{sfn|IT-285R2|1994|loc=par. 1}}
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| Part XI of the ''Income Tax Regulations'' provides for the calculation rules for CCA,<ref>{{Cite web|url = http://laws-lois.justice.gc.ca/eng/regulations/C.R.C.,_c._945/page-45.html#h-105|title = ITR Part XI}}</ref> and Schedule II outlines the various classes of capital property that are eligible for it.<ref>{{Cite web|url = http://laws-lois.justice.gc.ca/eng/regulations/C.R.C.,_c._945/page-220.html#h-448|title = ITR Schedule II }}</ref> Special rules are in place to deem certain assets to be in separate classes, thus not becoming part of the general pool for the class.<ref>ITR s. 1102</ref> Certain elections are available to taxpayers to transfer or reclassify assets from one class to another.<ref>ITR s. 1103</ref>
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| Additional allowances are prescribed with respect to specified circumstances.<ref>ITR s. 1100(1)</ref> Specialized calculations for certain classes are also outlined in:
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| * Schedule III for property in Class 13 ([[leasehold]] interests)<ref>{{Cite web|url = http://laws-lois.justice.gc.ca/eng/regulations/C.R.C.,_c._945/page-221.html#h-449|title = ITR Schedule III }}</ref><ref>{{Cite web|url = http://www.cra-arc.gc.ca/E/pub/tp/it464r/it464r-e.html|title = IT-464R: Capital Cost Allowance - Leasehold Interests}}</ref>
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| * Schedule IV for property in Class 15 (property for cutting and removing timber from a timber limit)<ref>{{Cite web|url = http://laws-lois.justice.gc.ca/eng/regulations/C.R.C.,_c._945/page-222.html#h-450|title = ITR Schedule IV }}</ref><ref>{{Cite web|url = http://www.cra-arc.gc.ca/E/pub/tp/it501/it501-e.html|title = IT-501: Capital Cost Allowance - Logging Assets}}</ref>
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| * Schedule V for property relating to [[industrial mineral]] mines<ref>{{Cite web|url = http://laws-lois.justice.gc.ca/eng/regulations/C.R.C.,_c._945/page-223.html#h-451|title = ITR Schedule V }}</ref><ref>{{Cite web|url = http://www.cra-arc.gc.ca/E/pub/tp/it492/it492-e.html|title = IT-492: Capital Cost Allowance - Industrial Mineral Mines}}</ref>
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| * Schedule VI for property relating to timber limits and cutting rights<ref>{{Cite web|url = http://laws-lois.justice.gc.ca/eng/regulations/C.R.C.,_c._945/page-224.html#h-452|title = ITR Schedule VI }}</ref><ref>{{Cite web|url = http://www.cra-arc.gc.ca/E/pub/tp/it481-consolid/it481-consolid-e.html|title = IT-481 (Consolidated): Timber Resource Property and Timber Limits}}</ref>
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| Part XVII of the ''Income Tax Regulations'' provides for specialized calculation rules for CCA with respect to capital property acquired for use in earning income from farming and fishing.<ref>{{Cite web|url = http://laws-lois.justice.gc.ca/eng/regulations/C.R.C.,_c._945/page-68.html#h-158|title = ITR Part XVII}}</ref>
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| ===Typical classes of assets for CCA purposes===
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| {| class="wikitable"
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| |-
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| ! Class
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| ! Rate
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| ! Description
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| |-
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| | 1
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| | 4%
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| | Buildings acquired after 1987
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| |-
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| | 3
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| | 5%
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| | Building acquired before 1987
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| |-
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| | 8
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| | 20%
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| | Assets not included in other classes
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| |-
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| | 9
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| | 25%
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| | Aircraft
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| |-
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| | 10
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| | 30%
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| | Cars costing less than $30,000
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| |-
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| | rowspan="2"|12<ref>{{cite web|title=Classes of depreciable property|url=http://www.cra-arc.gc.ca/tx/bsnss/tpcs/slprtnr/rprtng/cptl/dprcbl-eng.html|work=Canada Revenue Agency|accessdate=6 May 2013}}</ref>
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| | 100% (full year rule)
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| * medical or dental instruments and kitchen utensils, costing less than $500
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| * tools costing less than $500
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| * computer software (except systems software)
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| * video-cassettes, video-laser discs, and digital video disks for short-term rental
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| |-
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| | 100% (half year rule)<ref>{{cite web|title=Capital Cost Allowance Rates|url=http://www.taxtips.ca/smallbusiness/ccarates.htm|work=TaxTips.ca|accessdate=6 May 2013}}</ref><ref>ITR, s. 1100(2)(a)(iii)</ref>
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| * a die, jig, pattern, mould or last
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| * the cutting or shaping part in a machine
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| * a motion picture film or video tape that is a television commercial message
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| * a certified feature film or certified production
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| |-
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| | 13
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| | Original lease period plus one renewal period
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| (Minimum 5 years and Maximum 40 years)
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| | Improvements made to leased premises
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| |-
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| | 14
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| | Length of life of property (no half year rule)
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| | [[Franchising|Franchises]], Concessions, [[Patent]]s, and Licences
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| |-
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| | 17
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| | 8%
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| | Parking lots
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| |-
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| | 29
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| | Over three years, 25%-50%-25%
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| | Eligible machinery and equipment used in Canada to manufacture and process goods for sale or lease, acquired after March 18, 2007, and before 2014 that would otherwise be included in Class 43. General-purpose electronic data-processing equipment (commonly called computer hardware) and systems software for that equipment, including associated data processing equipment, if acquired after March 18, 2007, and before January 28, 2009, and used in qualifying manufacturing and processing activities, that otherwise would be in Class 50.
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| |-
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| | 43
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| | 30%
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| | Machinery and equipment used for production
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| |-
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| | 44
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| | Patents acquired after April 26, 1993
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| |-
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| | 45
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| | 45%
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| |Computer equipment and systems software acquired after March 22, 2004 and before March 19, 2007
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| |-
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| | 46
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| | 30%
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| | Data network equipment acquired after March 22, 2004
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| |-
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| | 50
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| | 55%
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| |Computer equipment and systems software acquired after March 18, 2007
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| |-
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| | 52
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| | 100% (no half year rule)
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| |Computer equipment and systems software acquired after January 27, 2009 and before February 2011. Only applies to new equipment used in Canada.
| |
| |-
| |
| |}
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|
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| In contrast to the practice followed in the United States for depreciation there is no penalty for failing to claim Capital Cost Allowance. Where a taxpayer claims less than the amount of CCA to which he is entitled the pool remains intact, and available for claims in future years. Unclaimed amounts are not subject to recapture.
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| ==[[Capital budgeting|Capital investment appraisal]] under CCA rules==
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| Because assets subject to CCA are generally pooled by class, and CCA is generally calculated on a declining-balance basis, specific techniques have been developed to determine the net present after-tax value of such capital investments. For standard scenarios under the full-year rule and half-year rule models, the following standard items are employed:{{sfn|Edge|Irvine|1981|p=64}}
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| :''I'' = Investment
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| :''d'' = CCA rate per year for tax purposes
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| :''t'' = rate of taxation
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| :''n'' = number of years
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| :''i'' = [[cost of capital]], rate of interest, or minimum rate of return (whichever is most relevant)
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| More specialized analysis would need to be applied to:
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| :* assets with specific lives (ie, Classes 13 and 14)
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| :* assets with non-standard rate calculations (ie, Class 29)
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| :* assets that are deemed to constitute a separate class of property, thus not becoming part of a capital cost pool
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| :* scenarios where disposal values at a future date are part of the appraisal calculation, leading to a deduction from the capital cost pool, a recapture of depreciation, or the calculation of a taxable capital gain
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| ===Full-year rule===
| |
| | |
| Capital cost allowance will be calculated as follows:{{sfn|Edge|Irvine|1981|pp=64{{endash}}65}}
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| {| class="wikitable"
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| |-
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| ! Year
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| ! Calculated CCA
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| |-
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| |1
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| |<math>Id</math>
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| |-
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| |2
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| |<math>Id(1-d)</math>
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| |-
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| |3
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| |<math>Id(1-d)^2</math>
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| |-
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| |''n''
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| |<math>Id(1-d)^{n-1}</math>
| |
| |}
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| Therefore, the tax shield in year ''n'' = <math>Itd(1-d)^{n-1}</math>, and the present value of the taxation credits will be equal to <math>Itd \sum_{n=1}^\infty \frac{(1-d)^{n-1}}{(1+i)^n}</math>
| |
| | |
| As this is an example of a converging series for a [[geometric progression]], this can be simplified further to become:
| |
| | |
| <math>PV = \frac{Itd}{i+d}</math>
| |
| | |
| The net present after-tax value of a capital investment then becomes:
| |
| | |
| <math>I \left (1-\frac{td}{i+d}\right )</math>{{sfn|Edge|Irvine|1981|p=65}}
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| ===Half-year rule===
| |
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| For capital investments where CCA is calculated under the half-year rule, the CCA tax shield calculation is modified as follows:
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| | |
| <math>\begin{align}
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| PV & = \frac{1}{2}\left (\frac{Itd}{i+d}\right ) + \frac{1}{2}\left (\frac{Itd}{i+d}\right )\left (\frac{1}{1+i}\right ) \\
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| & =\frac{Itd}{i+d}\left [\frac{1}{2} + \frac{\frac{1}{2}}{1+i}\right ] \\
| |
| & =\frac{Itd}{i+d}\left [\frac{\frac{1}{2}\left (1+i\right ) + \frac{1}{2}}{1+i}\right ] \\
| |
| & =\left (\frac{Itd}{i+d}\right )\left (\frac{1+\frac{1}{2}i}{1+i}\right ) \\
| |
| \end{align}</math><ref>{{Cite web|title = Capital Cost Allowance|url = http://www.cgamedia.org/1112fn1/unit5/u5_04_07.html|publisher = CGA Online|accessdate = 2 March 2013}}</ref>
| |
| | |
| Therefore, the net present after-tax value of a capital investment is determined to be:
| |
| | |
| <math>I \left [ 1-\left (\frac{td}{i+d}\right )\left (\frac{1+\frac{1}{2}i}{1+i}\right ) \right ]</math>
| |
| | |
| ==Case Law==
| |
| | |
| In cases where claims have been contested or disallowed by the Canada Revenue Agency, the Supreme Court of Canada has interpreted the Capital Cost Allowance in a fairly broad manner, allowing deductions on property which was owned for a very brief period of time,<ref>{{cite web|title = Hickman Motors Ltd. v. Canada, [1997] 2 S.C.R. 336 |url = http://www.taxcases.ca/hickman-motors-ltd-v-canada-1997-2-s-c-r-336/}}</ref> and property which is leased back to the vendor from which it originated.<ref>{{cite web|title = Canada Trustco Mortgage Co. v. Canada, [2005] 2 S.C.R. 601 |url = http://www.taxcases.ca/canada-trustco-mortgage-co-v-canada-2005-2-s-c-r-601/}}</ref> These decisions demonstrate the flexibility of the Capital Cost Allowance as a legal tax reduction strategy.
| |
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| ==See also==
| |
| *[[Income taxes in Canada]]
| |
| *[[MACRS]] - Modified Accelerated Cost Recovery System - [[Taxation in the United States|U.S.]] [[Internal Revenue Code]]
| |
| *[[Capital cost tax factor]]
| |
| | |
| ==References==
| |
| {{reflist|3}}
| |
| | |
| ==Further reading==
| |
| | |
| * {{Cite web|url = http://www.parl.gc.ca/Content/LOP/ResearchPublications/prb0606-e.pdf|title = PRB 06-06E: Capital Cost Allowance|author = Sheena Starky|publisher = [[Library of Parliament]]|date = 3 April 2006|accessdate = 5 March 2013}}
| |
| * {{cite book |author= Rose Filice|edition= 2nd|title= Capital Cost Allowance in Canada|url= http://books.google.ca/books?id=5uU-5gfjKvQC&lpg=PP1&pg=PP1#v=onepage&q&f=false|accessdate= 5 March 2013|year= 2005|publisher= [[CCH Canadian Limited]]|location= Toronto|isbn= 1-55367-511-8|page= |pages=833|ref={{sfnref|Filice|2005}}}}
| |
| * {{Cite web|url = http://www.cra-arc.gc.ca/E/pub/tp/it285r2/it285r2-e.html|title = Interpretation Bulletin IT-285R2: Capital Cost Allowance - General Comments|ref={{sfnref|IT-285R2|1994}}}}
| |
| * {{Cite web|url = http://www.cra-arc.gc.ca/tx/bsnss/tpcs/slprtnr/rprtng/cptl/clsss-eng.html|title = CCA Classes}}
| |
| * {{cite book |author1= C. Geoffrey Edge|author2= V. Bruce Irvine|authorlink= |title= A Practical Approach to the Appraisal of Capital Expenditures|url= |accessdate= 26 February 2013|year= 1981|publisher= [[Society of Management Accountants of Canada]]|location= Hamilton|isbn= 0-920212-29-8|page= |pages=283|ref={{sfnref|Edge|Irvine|1981}}}}
| |
| | |
| [[Category:Taxation in Canada]]
| |
| [[Category:Capital gains taxes]]
| |
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