QUESTION 3 [14 marks]

PART A:

Green Grasshopper Inc. (GG Inc.) has a December 31 year end. On January 1, 2021, the following

information on the CCA classes of the business was contained in its records:

Class 1 (4% CCA rate): The buildings in Class 1 were acquired in January, 2010 at a cost of

$734,000, with $84,000 of this total being allocated to land. The UCC balance on January 1, 2021

was $562,154.

Class 8 (20% CCA rate): The equipment in Class 8 was acquired in January, 2015 at a cost of

$78,500. The UCC balance on January 1, 2021 was $23,520.

Class 10 (30% CCA rate): The vehicles in Class 10 were acquired in June, 2017 at a total cost of $82,000. The UCC balance on January 1, 2021 was $34,153.

During the 2021 fiscal year, the following transactions occurred:

Sale of Buildings All buildings in Class 1 are sold for $825,000 and replaced with leased premises. Of the $825,000 received, $100,000 is for the land on which the buildings are situated. The lease term is for 4 years with an option to renew for 2 years. A total of $81,000 is spent on leasehold improvements in 2021 to make the buildings more suitable for the business.

Sale of Vehicles - The Class 10 vehicles were sold during the current year and replaced with leased vehicles. The sale proceeds totaled $27,500 with no vehicle being sold for more than its cost.

REQUIRED

For the taxation year ending December 31, 2021 calculate the maximum CCA that can be deducted by GG Inc. for each CCA class. In addition, calculate the January 1, 2022 UCC balances and indicate any other tax consequences that would result from the described transactions.