Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
What is the correct amount of CCA under the Act for a class 10.1 passenger vehicle acquired and disposed of during the same year?
Position:
No deduction for CCA or a terminal loss is permitted
Reasons:
Subsection 20(16.1) of the Act denies a terminal loss. Subsection 1100(2.5) of the Regulations does not permit a deduction for 1/2 of the CCA allowable as if the vehicle were not disposed of, unless it was owned at the end of the immediately preceding taxation year.
August 30, 2001
Mr. Owen Newell HEADQUARTERS
Excise & GST/HST Rulings Directorate Randy Hewlett, B.Comm.
General Operations Unit 613-957-8973
2001-008999
Capital Cost Allowance Class 10.1 - Acquisition and Disposition in the Same Year
We are writing in response to your letter dated June 26, 2001, wherein you requested our opinion on XXXXXXXXXX the correct amount of capital cost allowance (CCA) under the Income Tax Act (the Act) for a class 10.1 passenger vehicle acquired and disposed of during the same year.
When there is no property remaining in a prescribed class at the end of the taxation year, by virtue of the wording of the definition of undepreciated capital cost (UCC) in subsection 13(21) of the Act, no CCA is possible. There can only be recapture included in income under subsection 13(1) of the Act or a terminal loss deductible under subsection 20(16).
For a class 10.1 passenger vehicle, however, recapture is not required to be included in income pursuant to subsection 13(2) of the Act. As well, a terminal loss is not deductible pursuant subsection 20(16.1) of the Act. Subsection 1100(2.5) of the Income Tax Regulations (the Regulations) does permit a deduction for a class 10.1 passenger vehicle equal to half the amount of CCA that would be permitted as if the vehicle were not disposed of before the end of the year. However, the preamble of subsection 1100(2.5) of the Regulations requires that the vehicle be owned at the end of the immediately preceding taxation year.
As a result, where a class 10.1 vehicle is acquired and disposed of in the same taxation year, there is no deduction permitted under the Act in respect of the capital cost of that vehicle (i.e., CCA or terminal loss).
We trust our comments will be of assistance to you.
Terry Young, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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