What is CCA?

You might acquire a depreciable property, such as a building, machinery, or equipment, to use in your farming business. You cannot deduct the cost of the property when you calculate your net farming income for the year. However, since these properties may wear out or become outdated over time, you can deduct their cost over a period of several years. The deduction for this is called capital cost allowance (CCA).

Definitions

To calculate your CCA claim, you will need to know the meaning of the following terms.

Arm's length – refers to a relationship or a transaction between persons who act in their separate interests. An arm's length transaction is generally a transaction that reflects ordinary commercial dealings between parties acting in their separate interests.

"Related persons" are not considered to deal with each other at arm's length. Related persons include individuals connected by blood relationship, marriage, common-law partnership or adoption (legal or in fact). A corporation and another person or two corporations may also be related persons.

"Unrelated persons" may not be dealing with each other at arm's length at a particular time. Each case will depend upon its own facts. The following criteria will be considered to determine whether parties to a transaction are not dealing at arm's length:

• whether there is a common mind which directs the bargaining for the parties to a transaction;
• whether the parties to a transaction act in concert without separate interests; "acting in concert" means, for example, that parties act with considerable interdependence on a transaction of common interest; or
• whether there is de facto control of one party by the other because of, for example, advantage, authority or influence.

For more information, see Income Tax Folio S1-F5-C1, Related persons and dealing at arm's length.

Available for use – You can claim CCA on a depreciable property only when it becomes available for use.

Property other than a building usually becomes available for use on the earlier of:

• the date you first use it to earn income;
• the second tax year after the year you acquire the property;
• the time just before you dispose of the property;
• the time the property is delivered or made available to you and is capable of producing a saleable product or service; or
• the time the property is delivered and is capable of performing the function for which it was acquired only in respect of property acquired by you in the course of carrying on your farming or fishing business.

A building or part of a building usually becomes available for use on the earlier of:

• the date you start using 90% or more of the building in your business;
• the second tax year after the year you acquire the building; or
• the time just before you dispose of the building.

A building you are constructing, renovating, or altering usually becomes available for use on the earlier of:

• the date you complete the construction, renovation, or alteration;
• the date you start using 90% or more of the building in your business;
• the second tax year after the year you acquire the building; or
• the time just before you dispose of the building

Capital cost – the amount on which you first claim CCA. The capital cost of a depreciable property is usually the total of:

• the purchase price not including the cost of land, which is not depreciable;
• the part of your legal, accounting, engineering, installation, and other fees that relates to the purchase or construction of the depreciable property (not including the part that applies to land);
• the cost of any additions or improvements you made to the depreciable property after you acquired it, provided you have not claimed these costs as a current expense; and
• soft costs (such as interest, legal and accounting fees, and property taxes) related to the period you are constructing, renovating, or altering the building, provided you have not claimed these costs as a current expense.

Depreciable property – any property on which you can claim CCA. You usually group depreciable properties into classes. For example, diggers, drills, and tools that cost $500 or more belong to Class 8. You must base your CCA claim on a rate assigned to each class of property.

For the most common classes of depreciable properties you could use in your farming operation, see Classes of depreciable property and the Capital cost allowance (CCA) rates chart.

Fair market value (FMV) – generally the highest dollar value that you can get for your property in an open and unrestricted market between an informed and willing buyer and an informed and willing seller who are dealing at arm's length with each other.

Non-arm's length – generally refers to a relationship or transaction between persons who are related to each other.

However, a non-arm's length relationship might also exist between unrelated individuals, partnerships or corporations, depending on the circumstances. For more information, see the definition of "arm's length."

Proceeds of disposition – usually the amount you received, or that we consider you to have received, when you dispose of your depreciable property. This could include compensation you received for depreciable property that has been destroyed, expropriated, damaged, or stolen. For more information about proceeds of disposition, see Income Tax Folio S3-F4-C1, General Discussion of Capital Cost Allowance.

Undepreciated capital cost (UCC) – generally the amount left after you deduct CCA from the capital cost of a depreciable property. The CCA you claim each year reduces the UCC of the property each year.

How much CCA can you claim

Base your CCA claim on your fiscal period, not the calendar year. The amount of CCA you can claim depends on the type of property you own, and the date you acquired it. You group the depreciable property you own into classes. A different rate of CCA applies to each class.

We explain the most common classes of depreciable property in Classes of depreciable property. We list most of the classes of depreciable property and the rates for each class in the chart Capital cost allowance (CCA) rates.

Other things you should know about CCA:

• In most cases, you will use the declining balance method to calculate your CCA. This means that you claim CCA on the capital cost of the property minus the CCA you claimed in previous years, if any. The balance declines over the years as you claim CCA.
• You do not have to claim the maximum amount of CCA in any given year. You can claim any amount you like, from zero to the maximum allowed for the year. For example, if you do not have to pay income tax for the year, you may not want to claim CCA. Claiming CCA reduces the balance of the class by the amount of CCA claimed. As a result, the available CCA for future years will be reduced.
• In the year you acquire a depreciable property, you can usually claim CCA only on one-half of your net additions to a class. We explain this half-year rule in Column 6 – Adjustment for current-year additions. The available-for-use rules may also affect the amount of CCA you can claim. For more information, see Available for use.
• You cannot claim CCA on most land or on living things such as trees, shrubs, or animals. However, you can claim CCA on timber limits, cutting rights, and wood assets. For more information, see Interpretation Bulletin IT-481, Timber Resource Property and Timber Limits.
• If you receive income from a quarry, sand, or gravel pit, or a woodlot, you can claim a type of allowance known as a depletion allowance. For more information, see Interpretation Bulletins IT-373R2, Woodlots, and IT-492, Capital Cost Allowance – Industrial Mineral Mines.
• If you claim CCA and you later dispose of the property, you may have to add an amount to your income as a recapture of CCA. Alternatively, you may be able to deduct an additional amount from your income as a terminal loss. For more information, see Column 5 – UCC after additions and dispositions.
• If you used depreciable property in 2017 that you used in your farming business before January 1, 1972, complete "Area A – Part XVII properties" on Form T1175, Farming – Calculation of Capital Cost Allowance (CCA) and Business-use-of-home Expenses.
• If you are a partner of a partnership that provides you with a T5013 slip, Statement of Partnership Income, you cannot personally claim CCA for property owned by the partnership. The T5013 slip you receive will have already allocated to you a share of the partnership's CCA on the depreciable farm property.

You were asking?

Q. If I start a farming business on June 1, 2017, how do I determine my CCA claim to December 31, 2017?

A. Since the period is shorter than 365 days, you must prorate your CCA claim. Calculate your CCA using the rules we discuss in this chapter. However, base your CCA claim on the number of days in your fiscal period compared to 365 days.

In your case, your fiscal period is 214 days. Suppose you calculate your CCA to be $3,500. The amount of CCA you can claim is $2,052 ($3,500 × 214/365).

Form T1175, Farming – Calculation of Capital Cost Allowance (CCA) and Business-Use-of-Home Expenses

Business-use-of-home expenses

Use this section on Form T1175 to list your expenses and any amount of CCA for the business use of your home. Include these expenses and any amount of CCA for business-use-of-home expenses on "Line 9896 – Other (specify)," in the "Expenses" section of Form T1273 or Form T1274. You can also report any business-use-of-home expense carry forward from a previous year on the chart. This chart is for information purposes and to help you make an adjustment at line 9934 if you have a loss in the year. For more information on this adjustment, see Line 9934 – Adjustment to business use of home expenses.

Area A – Calculation of capital cost allowance (CCA)

Use Area A on Form T1175 to calculate your CCA deduction. Add lines (i) and (ii) of the chart and enter the result on line 9936 in the "Expenses" section of Form T1273 or Form T1274. If any part of the CCA is for business-use-of-home expenses, enter that part in the Business-use-of-home expenses section. For more information, see above.

If you acquired or disposed of buildings or equipment during the year, you will need to complete Area B, C, D, or E (whichever applies) before you complete Area A. Even if you are not claiming a deduction for CCA for your 2017 fiscal period, you should complete these areas to show any additions or disposals during the year. For more information on how to complete all these areas, see the following sections.

Column 1 – Class number

If this is the first year you are claiming CCA, see Classes of depreciable property for the most common classes of depreciable properties you could use in your farming operation, and Capital cost allowance (CCA) rates.

If you claimed CCA last year, you can get the class numbers from last year's Form T1175. Generally, if you own several properties in the same CCA class, you combine the capital cost of all these properties in one class. You then enter the total in Area A.

Column 2 – Undepreciated capital cost (UCC) at the start of the year

If this is the first year you are claiming CCA, skip this column. Otherwise, enter in this column the UCC for each class at the end of last year. If you completed Area A on Form T1175 last year, you will find these amounts in column 10.

You may have received a GST/HST input tax credit in 2016 for a passenger vehicle you used less than 90% of the time in your business. In this case, subtract the amount of the credit from your beginning UCC for your 2017 fiscal period. For more information, see Grants, subsidies, and rebates.

Subtract any investment tax credit you claimed or were refunded in 2016 from your UCC at the start of your 2017 fiscal period. Also, subtract any 2016 investment tax credit you carried back to a year before 2016.

Column 3 – Cost of additions in the year

If you acquire or make improvements to depreciable property in the year, we generally consider the improvements to be additions to the class in which the property belongs. For an exception to this rule, see Class 3 (5%).

Enter the details of your 2017 additions on your form as follows:

• complete Area B or Area C (whichever applies) of Form T1175; and
• for each class, enter in column 3 of Area A the corresponding amount from column 5 in Area B and Area C.

When completing Area B and Area C, enter in column 4 the part of the property that you use personally, separately from the part you use for business. For example, if you use 25% of the building in which you live for your farming business, your personal portion is the other 75%.

Do not include the value of your own labour in the cost of a property you build or improve. Include the cost of surveying or valuing a property you acquire in the capital cost of the property. Remember that a property usually has to be available for use before you can claim CCA. See Available for use.

If you replace lost or destroyed property, special rules for replacement property may apply. The replacement property must be acquired within two years of the end of the taxation year in which it was lost or destroyed. For more information, see Interpretation Bulletins IT-259R4, Exchange of Property, and IT-491, Former Business Property, and its Special Release.

Area B – Details of equipment additions in the year

List the details of all equipment, machinery, or motor vehicles you acquired or improved in 2017. Group the equipment into the applicable classes, and put each class on a separate line. Enter on line 9925 the total business portion of the cost of the equipment.

Area C – Details of building additions in the year

List the details of all buildings you acquired or improved in 2017. Group the buildings into the applicable classes, and put each class on a separate line. Enter on line 9927 the total business portion of the cost of the buildings. The cost includes the purchase price of the building, plus any related expenses that you should add to the capital cost of the building, such as legal fees, land transfer taxes, and mortgage fees.

To find out if any special situations apply in your case when you acquire property, you should also see Special situations.

Land

Land is not depreciable property. Therefore, you cannot claim CCA on its cost. If you acquire a farm property that includes both land and a building, enter in column 3 of Area C only the cost of the building. To work out the building's capital cost, you must split any fees that relate to the purchase of the property between the land and the building. Related fees may include legal and accounting fees.

Calculate the part of the related fees you can include in the capital cost of the building as follows:

You do not have to split a fee if it relates specifically to the land or the building. In this case, you would add the amount of the fee to the cost to which it relates either the land or the building.

Column 4 – Proceeds of disposition in the year

If you disposed of a depreciable property during your 2017 fiscal period:

• complete Area D and Area E on page 2 of Form T1175, if they apply; and
• enter at column 4 of Area A for each class, the amount from column 5 of Area C and Area D for the class.

When completing Area D and Area E, enter in column 3 one of the following amounts, whichever is less:

• your proceeds of disposition, minus any related expenses; or
• the capital cost of your depreciable property.

If you replace lost or destroyed property, special rules for replacement property may apply. The replacement property must be acquired within two years of the end of the taxation year in which it was lost or destroyed. For more information, see Interpretation Bulletins IT-259R4, Exchange of Property, and IT-491, Former Business Property, and its Special Release.

Special rules may apply if you dispose of a building for less than both its undepreciated capital cost and your capital cost. If this is the case, for more information, see Special rules for disposing of a building in the year.

If you dispose of a depreciable property for more than its cost, you will have a capital gain. For more information on capital gains, see Chapter 8. You cannot have a capital loss when you sell depreciable property. However, you may have a terminal loss. For more information on terminal losses, see Column 5 – UCC after additions and dispositions.

For more information, see Income Tax Folio S3-F4-C1, General Discussion of Capital Cost Allowance.

Area D – Details of equipment dispositions in the year

In this area, list the details of all equipment, machinery, or motor vehicles you disposed of in 2017. Group the properties into the applicable classes, and put each class on a separate line. Enter on line 9926 the total business portion of the proceeds of disposition of the equipment, machinery, and motor vehicles.

Area E – Details of building dispositions in the year

In this area, list the details of all buildings you disposed of in 2017. Group the buildings into the applicable classes, and put each class on a separate line. Enter on line 9928 the total business portion of the proceeds of disposition of the buildings.

Column 5 – UCC after additions and dispositions

You cannot claim CCA when the amount in column 5 is:

• negative (see Recapture of CCA); or
• positive and you do not have any property left in that class at the end of your 2017 fiscal period (see Terminal loss).

In either case, enter "0" in column 10.

Recapture of CCA

If the amount in column 5 is negative, you have a recapture of CCA. Include your recapture on line 9600 in the "Income" section of Form T1273 or T1274. A recapture of CCA can occur, for example, when you get a government grant, or claim an investment tax credit.

It can also happen if the proceeds from the sale of depreciable property are more than the total of:

• the UCC of the class at the beginning of the year; and
• the capital cost of any additions during the year.

In some cases, you may be able to postpone a recapture of CCA. For example, you may sell a property and replace it with a similar one, someone may expropriate your property, or you may transfer property to a corporation, a partnership, or your child.

Terminal loss

If the amount in column 5 is positive, and you no longer own any property in that class, you may have a terminal loss. More precisely, you may have a terminal loss when, at the end of your fiscal period, you have no more property in the class, but you still have an amount that you have not deducted as CCA. You can usually subtract this terminal loss from your gross farming income in the fiscal period you disposed of the depreciable property. Include your terminal loss on line 9896 in the "Expenses" section of Form T1273 or T1274.

For more information on recapture of CCA and terminal loss, see Income Tax Folio S3-F4-C1, General Discussion of Capital Cost Allowance.

Column 6 – Adjustment for current-year additions

In the year you acquire or make additions to a property, you can usually claim CCA on only one-half of your net additions (the amount in column 3 minus the amount in column 4). We call this the half-year rule.

Calculate your CCA claim only on the net adjusted amount. Do not reduce the cost of the additions in column 3, or the CCA rate in column 8. For example, if you acquired a property in 2017 for $30,000, you would base your CCA claim on $15,000 ($30,000 × 50%).

If you acquired and disposed of depreciable property of the same class in 2017, the calculation in column 6 restricts your CCA claim. Calculate the CCA you can claim as follows:

• determine which of the following amounts is less:
  • the proceeds of disposition of your property, minus any related costs or expenses; or
  • the capital cost.
• subtract the above amount from the capital cost of your addition.
• enter 50% of the result in column 6. If the result is negative, enter "0."

In some cases, you do not make an adjustment in column 6. For example, in a non-arm's length transaction you may buy depreciable property that the seller continuously owned from the day that is at least 364 days before the end of your 2017 fiscal period to the day the property was purchased. However, if you transfer personal property, such as a car or a personal computer into your business, the half-year rule applies to the particular property transferred.

Some properties are not subject to the half-year rule. Examples of these are the properties in classes 13, 14, 23, 24, 27, 29, 34, and 52, as well as some of those in class 12, such as small tools that cost less than $500.

The half-year rule does not apply when the available-for-use rule denies a CCA claim until the second tax year after the year you acquired the property.

For more information on the half-year rule, see Income Tax Folio S3-F4-C1, General Discussion of Capital Cost Allowance.

Column 7 – Base amount for CCA

Base your CCA claim on this amount.

For a class 10.1 vehicle you disposed of in your 2017 fiscal period, you may be able to claim 50% of the CCA that would be allowed if you still owned the vehicle at the end of your 2017 fiscal period. This is known as the half-year rule on sale.

You can use the half-year rule on sale if, at the end of your 2016 fiscal period, you owned the class 10.1 vehicle you disposed of in 2017. If this applies to you, in column 7 enter 50% of the amount in column 2.

Column 8 – Rate (%)

Enter the rate in this column for each class of property in Area A of Form T1175. For a list of rates, see Capital cost allowance (CCA) rates. For more information on certain kinds of property, see Classes of depreciable property.

Column 9 – CCA for the year

In column 9, enter the CCA you would like to deduct for 2017. The CCA you can deduct cannot be more than the amount you get when you multiply the amount in column 7 by the rate in column 8. You can deduct any amount up to the maximum.

If this is your first year of business, you may have to prorate your CCA claim. See You were asking?

For Part XI assets, add the amounts in column 9 and enter the total on line (i). For Part XVII assets, add the amounts in column 6 and enter the total on line (ii). Enter the total of lines (i) and (ii), minus any CCA for business-use-of-home expenses, on line 9936 of the "Expenses" section of Form T1273 or T1274. Enter any CCA for business-use-of-home expenses on page 1 of Form T1175. For more information, see Business-use-of-home expenses.

To find out how to calculate your CCA claim if you are using the property for both business and personal use, see Personal use of property.

Column 10 – UCC at the end of the year

This is the UCC at the end of your 2017 fiscal period. It is the amount you will enter in column 2 when you calculate your CCA claim next year.

Enter "0" in column 10 if you have a terminal loss or a recapture of CCA. There will not be an amount in column 10 for a class 10.1 passenger vehicle you dispose of in the year.

The example at the end of this chapter sums up CCA.

Classes of depreciable property

The following are the most common classes of depreciable farm property and the rates that apply to each class.

Buildings – Classes 1, 3, and 6

A building may belong to Class 1, Class 3, or Class 6, depending on what the building is made of and the date you acquired it. You also include in these classes the parts that make up the building, such as:

• electrical wiring;
• lighting fixtures;
• plumbing;
• sprinkler systems;
• heating equipment;
• air-conditioning equipment (other than window units);
• elevators; and
• escalators.

Class 1 (4%)

Class 1 includes most buildings acquired after 1987, unless they specifically belong in another class. Class 1 also includes the cost of certain additions or alterations you made after 1987 to a Class 3 building. For more information, see Class 3 (5%).

The CCA rate for eligible non-residential buildings acquired by a taxpayer after March 18, 2007, used for the manufacturing or processing in Canada of goods for sale or lease, includes an additional allowance of 6% for a total rate of 10%. The CCA rate for other eligible non-residential buildings includes an additional allowance of 2% for a total rate of 6%. To be eligible for one of the additional allowances, you must elect to place a building in a separate class. To make the election, attach a letter to your return for the tax year in which you acquired it. If you do not file an election to put it in a separate class, the current rate of 4% will apply.

This applies to buildings acquired after March 18, 2007, (including a new building, if any portion of it is acquired after March 18, 2007, where the building was under construction on March 19, 2007) that have not been used or acquired for use before March 19, 2007.

To be eligible for the 6% additional allowance, at least 90% of a building (measured by square footage) must be used for the designated purpose at the end of the tax year. Manufacturing and processing buildings that do not meet the 90% use test will be eligible for the additional 2% allowance if at least 90% of the building is used for non-residential purposes at the end of the tax year.

Class 3 (5%)

Most buildings acquired before 1988 were added to Class 3 or Class 6. If you acquired a building before 1990 that does not fall into Class 6, you can include it in Class 3 if one of the following applies:

• you acquired the building under the terms of a written agreement entered into before June 18, 1987; or
• the building was under construction by you, or for you, on June 18, 1987.

Do not transfer to Class 1 any property you previously included in Class 3. However, there is a limit to how much you can include in Class 3 for the cost of any additions or alterations made after 1987 to a Class 3 building. This limit is one of the following amounts, whichever is less:

• $500,000; and
• 25% of the building's capital cost (including the cost of additions or alterations to the building included in Class 3, Class 6, or Class 20 before 1988).

Include the cost of any additions or alterations over this limit in Class 1.

Class 6 (10%)

Include a building in Class 6 if you acquired it before 1988 and it is made of frame, log, stucco on frame, galvanized iron, or corrugated iron. If you acquired the building after 1987, it has to be made of frame, log, stucco on frame, galvanized iron, or any corrugated metal.

In addition, one of the following conditions has to apply:

• the building is used for farming or fishing; or
• the building has no footings or other base supports below ground level.

If either of the above conditions applies, you also add to class 6 the full cost of all additions and alterations to the building.

If neither of the above conditions applies, include the building in Class 6 if one of the following conditions applies:

• you acquired the building before 1979;
• you entered into an agreement before 1979 to acquire the building, and footings or other base supports were started before 1979; or
• you started construction of the building before 1979 (or it was started under the terms of a written agreement you entered into before 1979), and footings or other base supports of the building were started before 1979.

For additions or alterations to such a building:

• add to Class 6:
  • all additions made before 1979; and
  • only the first $100,000 of additions or alterations made after 1978.
• add to Class 3:
  • the part of the cost of all additions or alterations above $100,000 made after 1978 and before 1988; and
  • the part of the cost of additions or alterations above $100,000 made after 1987, but only up to $500,000 or 25% of the cost of the building, whichever is less.
• add to Class 1 any additions or alterations above these limits.

For more information, see Interpretation Bulletin IT-79R3, Capital Cost Allowance – Buildings or Other Structures.

Class 8 (20%)

Class 8 with a CCA rate of 20% includes certain property that is not included in another class. Examples are furniture, appliances, tools costing $500 or more per tool, some fixtures, machinery, outdoor advertising signs, refrigeration equipment, and other equipment you use in business.

Photocopiers and electronic communications equipment, such as fax machines and electronic telephone equipment are also included in Class 8.

Include data network infrastructure equipment and systems software for that equipment acquired before March 23, 2004. If acquired after March 22, 2004, include it in Class 46. See Class 46 (30%).

Include buildings that you use to store fresh fruit or vegetables by or for the person or persons by whom they were grown, at a controlled temperature in Class 8 instead of Class 1, Class 3, or Class 6. Also include in Class 8 any buildings that you use to store silage.

Small tools – Class 12 (100%)

The cost limit for access to the Class 12 (100%) treatment will increase to $500 from $200 for tools acquired on or after May 2, 2006.

Most small tools in Class 12 are not subject to the half-year rule. They are fully deductible in the year of purchase. If the tool costs $500 or more, include it in Class 8 with a CCA rate of 20%.

Class 12 tools that are subject to the half-year rule include dies, jigs, patterns, moulds or lasts, and the cutting or shaping part of a machine. For more information, see Income Tax Folio S3-F4-C1, General Discussion of Capital Cost Allowance.

Include in Class 12 with a CCA rate of 100% computer software that is not systems software. Software in Class 12 is subject to the half-year rule.

Class 45 (45%)

Include general-purpose electronic data processing equipment (commonly called computer hardware) and systems software for that equipment, including associated data processing equipment, in Class 45 with a CCA rate of 45% if you acquired them after March 22, 2004, and before March 19, 2007.

Class 46 (30%)

Include in Class 46 with a CCA rate of 30% data network infrastructure equipment and systems software for that equipment if acquired after March 22, 2004. If acquired before March 23, 2004, include it in Class 8. See Class 8 (20%).

Class 50 (55%)

Include in Class 50 with a CCA rate of 55% property acquired after March 18, 2007, that is general-purpose electronic data processing equipment and systems software for that equipment, including ancillary data processing equipment, but not including property that is included in Class 52 or that is principally or is used principally as:

1. electronic process control or monitor equipment;
2. electronic communications control equipment;
3. systems software for equipment referred to in a) or b); or
4. data handling equipment (other than data handling equipment that is ancillary to general-purpose electronic data processing equipment).

Class 52 (100%)

Include in Class 52 with a CCA rate of 100% (with no half-year rule) general-purpose electronic data processing equipment (commonly called computer hardware) and systems software for that equipment, including ancillary data processing equipment if acquired after January 27, 2009, and before February 2011, but not including property that is principally or is used principally as:

1. electronic process control or monitor equipment;
2. electronic communications control equipment;
3. systems software for equipment referred to in a) or b); or
4. data handling equipment (other than equipment that is ancillary to general-purpose electronic data processing equipment).

To qualify for this rate the asset must also:

• be situated in Canada;
• have not been used, or acquired for use, for any purpose before it is acquired by the taxpayer; and
• be acquired by the taxpayer:
  • for use in a business carried on by the taxpayer in Canada or for the purposes of earning income from property situated in Canada; or
  • for lease by the taxpayer to a lessee for use by the lessee in a business carried on by the lessee in Canada or for the purpose of earning income from property situated in Canada.

Passenger vehicles – Class 10 and Class 10.1 (30%)

Your passenger vehicle may belong to either class 10 or class 10.1. Include your passenger vehicle in class 10 unless it meets a class 10.1 condition. List each class 10.1 vehicle separately.

Include your passenger vehicle in class 10.1 if you bought it in your 2017 fiscal period and it cost more than $30,000. We consider the capital cost of that vehicle to be $30,000 plus the related GST and PST, or HST.

The $30,000 amount is the capital cost limit for a passenger vehicle. However, to determine the class to which your passenger vehicle belongs, you must use the cost of the vehicle before you add GST and PST, or HST.

Special situations

Changing from personal to business use

You may have bought a property for personal use and then started using it in your farming business in your 2017 fiscal period. When you change its use you need to determine the capital cost for business purposes.

Enter the fair market value (FMV) of the property in column 3 of Area B or C, whichever applies, if, at the time of change in use, the FMV of the depreciable property is less than its original cost.

When you start to use your property for your farming business, you are considered to have disposed of it. If the FMV of the property is greater than its cost, you may have a capital gain. For more information on capital gains, see Chapter 8.

Use the following chart to determine the amount to enter in column 3 when the FMV is more than its original cost.

We consider that you acquire the land for an amount equal to its FMV when you change its use. Include this amount on "Line 9923 – Total cost of all land additions in the year," in Area F.

Personal use of property

If you buy property for both business and personal use, there are two ways to show the business portion of the property in Area B or C:

• If your business use stays the same from year to year, enter the total cost of the property in column 3, the personal portion in column 4, and the business portion in column 5. To calculate the CCA you can claim, enter the amount from column 5 in column 3 of Area A.
• If your business use changes from year to year, enter the total cost of the property in column 3 and column 5, and enter "0" in column 4. To calculate the CCA you can claim, enter the amount from column 5 in column 3 of Area A. When you claim CCA, you must calculate the allowable portion you can claim for business use.

Grants, subsidies, and rebates

You may receive a grant, subsidy, or a rebate from a government or a government agency to buy depreciable property. When this happens, subtract the amount of the grant from the property's capital cost. Do this before you enter the capital cost in column 3 of Area B or C.

If the rebate is more than the remaining undepreciated capital cost in the particular class, add the excess to income on line 9574 or 9575.

You may have incurred GST or HST on some of the depreciable property you acquired for your business. If so, you may have also received an input tax credit from us.

Subtract the input tax credit from the property's capital cost. Do this before you enter the capital cost in column 3 of Area B or C, whichever applies. If you receive an input tax credit for a passenger vehicle you use in your business, use one of these methods:

• For a passenger vehicle you use 90% or more for your business, subtract the amount of the credit from the vehicle's cost before you enter its capital cost in column 3 of Area B.
• For a passenger vehicle you use less than 90% for your business, do not make an adjustment in 2017. In 2018, subtract the amount of the credit from your beginning UCC.

You may get an incentive from a non-government agency to buy depreciable property. For example, you can receive a tax credit that you can use to reduce your income tax payable. If this happens, you can either include the amount in income, or subtract the amount from the capital cost of the property.

For more information about government assistance, see Interpretation Bulletin IT-273R2, Government Assistance – General Comments.

Non-arm's length transactions

When you acquire depreciable property in a non-arm's length transaction, there are special rules to follow to determine the property's cost. These special rules will not apply if you get the property because of someone's death.

You can acquire depreciable property in a non-arm's length transaction from:

• an individual resident in Canada;
• a partnership with at least one partner who is another partnership from an individual resident in Canada; or
• a partnership with no partners who are individuals resident in Canada or with no partners that are other partnerships.

If you pay more for the property than the seller paid for it, calculate the cost as follows:

We consider that you acquire the land for an amount equal to its FMV when you change its use. Include this amount on line 9923 in Area F.

You can also buy depreciable property in a non-arm's length transaction from:

• a corporation or an individual who is not a resident of Canada; or
• a partnership with no partners who are individuals resident in Canada or no partners that are members of other partnerships.

If you pay more for the property than the seller paid for it, calculate the capital cost as follows:

You might have bought depreciable property in a non-arm's length transaction and paid less for it than the seller paid. If that is the case, your capital cost is the same amount as the seller paid. We consider you to have deducted as CCA the difference between what you paid and what the seller paid. Enter the amount you paid in column 3 of Area A. Enter the same amount in Area B or C, whichever applies.

There is a limit on the cost of a passenger vehicle you buy in a non-arm's length capital transaction. The cost is one of these three amounts, whichever is less:

• the FMV when you buy it;
• $30,000 plus any GST/HST, or PST you would pay on $30,000, if you bought it in your 2017 fiscal period; or
• the seller's cost amount of the vehicle when you buy it.

The cost amount can vary, depending on what the seller used the vehicle for before you bought it.

If the seller used the vehicle to earn income, the cost amount will be the undepreciated capital cost (UCC) of the vehicle when you buy it. If the seller did not use the vehicle to earn income, the cost amount will usually be the original cost of the vehicle.

For more information on non-arm's length transactions, see Income Tax Folio S1-F5-C1, Related persons and dealing at arm's length.

Special rules for disposing of a building in the year

If you disposed of a building in the year, special rules may apply that change the amount you use as proceeds of disposition for capital cost purposes. This happens when you meet both of the following conditions:

• you disposed of the building for an amount less than both its cost amount, as calculated below, and its capital cost to you; and
• you, or a person with whom you do not deal at arm's length, owned the land that the building is on, or the land next to it, that was necessary for the building's use.

Calculate the cost amount as follows:

• If the building was the only property in the class, the cost amount is the undepreciated capital cost (UCC) of the class before you disposed of the building.
• If there is more than one property in the same class, you must calculate the cost amount of each building as follows:

If you disposed of a building under these conditions and you or a person with whom you do not deal at arm's length disposed of the land in the same year, calculate your deemed proceeds of disposition as shown in Calculation A.

If you, or a person with whom you do not deal at arm's length, did not dispose of the land in the same year as the building, calculate your deemed proceeds of disposition as shown in Calculation B.

Ordinarily, you can deduct all of a terminal loss, but only part of a capital loss. Calculation B ensures that you use the same factor to calculate a terminal loss for a building as you use to calculate a capital loss on land. As a result of this calculation, you add part of the amount on line 5 to the actual proceeds of disposition from the building (see Terminal loss).

Replacement Property

In some cases, you can postpone or defer recognizing a capital gain or recapture of CCA in computing income. You might sell a business property and replace it with a similar one, or your property might be stolen, destroyed, or expropriated, and you replace it with a similar one. To defer reporting the gain or recapture of CCA, you (or a person related to you) must acquire the replacement property within the specified time limits and use the new property for the same or similar purpose.

For more information, see Interpretation Bulletins IT-259R4, Exchange of Property, and IT-491, Former Business Property, and its Special Release.

You can also defer a capital gain or recapture of CCA when you transfer property to a corporation, a partnership, or your child. For more information on transferring farm property to your child.

For more information on transfers to a corporation or a partnership, see the latest version of:

• Information Circular IC76-19R3, Transfer of Property to a Corporation Under Section 85;
• Interpretation Bulletin IT-291R3, Transfer of Property to a Corporation under Subsection 85(1);
• Interpretation Bulletin IT-378R, Winding-up of a Partnership; and
• Interpretation Bulletin IT-413R, Election by Members of a Partnership under Subsection 97(2).

Area F – Details of land additions and dispositions in the year

In this area, enter the total cost of acquiring land in 2017. The cost includes the actual purchase price of the land, plus any related expenses that you should add to the capital cost of the land, such as legal fees, land transfer taxes, and mortgage fees. Enter on line 9923 the total cost of all land additions in the year. You cannot claim CCA on land. Do not enter this amount in column 3 of Area A.

Enter on line 9924 the total of all amounts you received or will receive for disposing of land in the year.

Area G – Details of quota additions and dispositions in the year

Enter on line 9929 of Form T1175 the total cost of acquiring quotas in the year.

Enter on line 9930 of Form T1175 the total of all amounts you received or will receive for disposing of quotas in the year.

Details of equity

Line 9931 – Total business liabilities

A liability is a debt or an obligation of a business. Total business liabilities are the total of all amounts your farming business owes at the end of its fiscal period. This includes accounts payable, notes payable, taxes payable, unpaid salaries, wages and benefits, interest payable, deferred or unearned revenues, loans payable, mortgages payable, or any other outstanding balance.

Line 9932 – Drawings in 2017

A drawing is any withdrawal of cash or other assets and services of a business by the proprietor or partners. This includes transactions by the proprietor or partners (or family members) such as withdrawing cash for non-business use and using business assets and services for personal use.

Line 9933 – Capital contributions in 2017

A capital contribution is an addition of cash or other assets you made to the farming business during its fiscal period. This includes adding personal funds to the business account, paying business debts with personal funds, and transferring personal assets to the farming business.

The following example summarizes this chapter on CCA.