Question

A wholesale business with December 31 year-end purchased new equipment on November 25, 2018, for 40,000. Before 2018, the business owned no other equipment.

Required:

1. Complete the table below to show the tax consequences. If the business sells the equipment in 2020 for (a)$15000 (b) $23000 (c) $46000.

2018 purchase:

2018 CCA:

2018 UCC:

2019 CCA:

2019 UCC:

SITUATION A:

Less: Disposal Proceeds:

Interim UCC:

Terminal Loss/ Recapture:

Ending UCC:

Situation B

Less: Disposal Proceeds:

Interim UCC:

Terminal Loss/ Recapture

Ending UCC:

Situation C

Less: Disposal proceeds:

Interim UCC balance

Terminal Loss/ Recapture

Ending UCC:

Capital Gain:

Taxable Capital Gain:

2) How would your answer change if on December 31, 2020. the business acquired new equipment costing $1000? ( Enter minus sign when the amount is reducing the CCA

SITUATION A:

Less: Disposal Proceeds:

Interim UCC:

Terminal Loss/ Recapture:

Ending UCC:

Situation B

Less: Disposal Proceeds:

Interim UCC:

Terminal Loss/ Recapture

Ending UCC:

Situation C

Less: Disposal proceeds:

Interim UCC balance

Terminal Loss/ Recapture

Ending UCC:

Capital Gain:

Taxable Capital Gain:

Answer 1

1)

Sr. No.	Particulars	Amount
1	2018 purchase:	40,000
2	2018 CCA: 1/2 of 20%	4,000
3	2018 UCC: (1-2)	36,000
4	2019 CCA: 20% on (3)	7,200
5	2019 UCC: (4-5)	28,800
			Situation A	Situation B	Situation C
6	Less: Disposal Proceeds:	Lower of Cost or Sales Proceed	15,000	23,000	40,000
7	Interim UCC: ( 6 -7)		13,800	5,800	-11,200
8	Terminal Loss/ Recapture:	( 7 - 8)	13,800	5,800	-11,200
9	Ending UCC:		-	-	-
10	Capital Gain	( 46,000 - 40,000 )			6,000
11	Taxable Capital Gain				-

2)

Sr. No.	Particulars	Amount
1	2018 purchase:	40,000
2	2018 CCA: 1/2 of 20%	4,000
3	2018 UCC: (1-2)	36,000
4	2019 CCA: 20% on (3)	7,200
5	2019 UCC: (4-5)	28,800
			Situation A	Situation B	Situation C
6	Additions		1,000	1,000	1,000
7	Less: Disposal Proceeds:	Lower of Cost or Sales Proceed	15,000	23,000	40,000
8	Interim UCC: ( 6 -7)		14,800	6,800	-10,200
9	Net Additons	( 6 - 7 ) or 0 whichever is higher	-	-	-
10	Base Amount for CCA		14,800	6,800	-10,200
11	CCA 2020		2,960	1,360	-
12	Terminal Loss/ Recapture:		-	-	-10,200
13	Ending UCC:	( 10 - 11 ) or 0 if negative	11,840	5,440	-
14	Capital Gain	( 46,000 - 40,000 )			6,000
15	Taxable Capital Gain				-