Question

Roden Ltd. has a December 31 year end. The Company leases its office space under a lease that was signed on January 1, 2016. The lease term is 5 years, with an option to renew at an increased rent for an additional 2 years. In 2016, the Company spent $74,000 renovating the premises. In 2020, changing needs require the Company to spend another $16,000 renovating the space. Determine the maximum amount of Class 13 CCA that the Company can deduct for 2020 and 2021.

Answer 1

Class 13 Capital Cost allowance capital cost of a leasehold interest of class 13 property includes an amount that the lessee spends :

1. Any improvements or alterations to a leased property which is capital nature other improvements or alterations that are included as a part of building or structure.
2. Sublease of the property or obtain and extend the lease and pay to the landlord.

The CAA rate depends upon the type of property which is leased.

But some amounts are not included as a capital cost of a leasehold interest . These includes

• Any amount paid to cancel the lease.
• Any amount paid by tenant other than lease rent or as a prepayment of rent.

In the given question the company spends $74,000 as renovating the premises. In 2020 the company spend also $16,000 in other renovating space.

According to the Class 13 CAA the company can deduct the maximum amount of ($70,000 + $16,000) $86,000.

Because of company leases his office's premises as an agreement of renew at an increased rent for additional 2 years.