Question

Chazerai Ltd. is engaged in manufacturing and processing, which is 95% of their business, with a December 31 year-end. On January 1, 2019, the undepreciated capital cost for each class of its assets was as follows:

Class 1 - MB	Building	$ 316,558
Class 8	office furniture and equipment	$ 60,000
Class 10.1	automobiles	$ 17,850
Class 12	small tools	$ 5,000
Class 13	Leasehold improvements	$ 175,000

The following additional information was found in the 2019 audit files:

(1) The building, which cost $564,309 in 2013, was sold for $260,000. It was the only building in Class 1 MB at the time of its sale. The underlying land was sold for proceeds equal to the original cost. Chazerai Ltd purchased a new building in August 2019 for $600,000.

(2) New office furniture was purchased for $20,000. This purchase replaced old assets, which were sold for $5,000. None of the old assets were sold for more than original cost.

(3) Some small tools were sold for a total of $7,000. All of these tools were sold at a price less than their original cost.

(4) The opening balance in Class 13 represents leasehold improvements of $210,000 made during 2017 to the leased warehouse. During 2019, further leasehold improvements were made to the same leased warehouse at a cost of $24,000. The remaining lease term was five years with two successive two-year renewal terms.

(5) The Class 10.1 automobile was purchased in 2017 for $34,000. During 2019, it was sold for $21,000. A new automobile was purchased for $45,200, which included HST of $5,200 (13%).

(6) A license (expected to be used indefinitely) was purchased for $60,000 in June 2019.

(7) A new computer was purchased in January 2019 for $7,000.

THIS IS CANADIAN INCOME TAX. THIS IS THE COMPLETE QUESTION. I would request a person who is knowledgeable in Canadian Income Tax should answer this rather than asking for Tax rates. Thank you

Required:

Prepare a schedule to show the maximum deductions for tax purposes available to Chazerai Ltd. for 2019 based on the above information.

Answer 1

A schedule of max deductions for tax purposes available for Year 2019:

	Class	Opening - UCC (in $)	Months	CCA Rate (in %)	Acquisition (in $)	Disposition(In $)	Assistance(in $)	Closing UCC (in $)	Capital Cost Allowance(in $)
Building	1 - MB	316,558	12	4	600,000	260000	0	656558	19,462.32
Furniture&Equipment	8	60,000	12	20	20000	5000	0	75000	13500
Automobiles	10.1	17,850	12	30	45200	21000	5200	42,050	9765
SmallTools	12	5,000	12	100	0	5000	0	0	2500
LeaseholdImprovements	13	175,000	12	7Yrs	24000	0	0	199000	28429
Computers	50	0	12	55	7000	0	0	7000	1925

Finally, The Total CCA is ==> $75,581

Calculation:

CCA ==> (t*CCA-Rate*Closing UCC) - 1/2 * CCA-Rate (Acquisition in current Period - Proceeds of disposition - Assistance received)

where t = proposition Days used in current year = 1 for every asset

Lets Calculate for Building

CCA ==> (1*4%*656,558) - (1/2 * 4%(600,000 - 260,000 - 0) ==> 26262.32 - 6,800 ==> $19462.32

Similarly calculate for remaining.

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