Question
In: Accounting
2020 UCC balance $15000 in class 10.1 then purchased new car of 50000. in 2020 a...
2020 UCC balance $15000 in class 10.1 then purchased new car of
50000. in 2020 a car was sold for 20000 and purchased for 80000.
what will be the tax implications for 2020 for these two
situations?
Solutions
Expert Solution
For 2020:
Case 1: UCC balance $15000 in class 10.1 then purchased new car of 50000.
For Class 10.1 vehicle, CCA (Capital Cost Allowance) in the Previous Year 2019, maximum allowed is $30,000.
UCC balance is $ 15,000. Let's assume that this balance is used to purchase new car worth $ 50,000.
Taxable Amount = $35,000 [50,000 - 15,000]
Maximum deductible = $30,000 + GST
Assume GST Rate is 10% = $30,000 x 10% = 3,000
Therefore, maximum claimable = 33,000.
Note: No matter how much is the abount, maximum claimable is = $30,000 + $3,000 (GST/HST/PST). This amount ($33,000) is to be entered in Column 3 of Form T777.
Case 2: A car was sold for 20000 and purchased for 80000.
Sales price of car: $20,000
Purchase Price: $80,000
Difference Paid = $60,000
Note: This is to be entered in Column 4 of Form T777.
Rule: Lesser of
- the proceeds of disposition of the property (minus) the related outlays and expenses; and
- the capital cost of the vehicle
= Diiference or Capital Cost of Vehicle whichever is lesser.
= $60,000 or $80,000 [whichever is lower]
= $60,000.
Conlcusion: Tax implications in cases are as follows.
Case 1: Maximum Claimable = $33,000.
Case 2: Tax Payable on $60,000.
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