Question 3 (25 Marks)

Resources Ltd. had the following UCC and CEC balances on January 01, 2016:

Class 08	$ 200,000
Class 10	150,000
Class 12	45,000
Class 13	204,000
CEC	180,000

For the taxation year ending December 31, 2016, Resources Ltd. determined that its Net Income for Tax Purposes, before any deductions for CCA or CEC, amounted to $ 47,000. As the Company did not have any Division C deductions, Taxable Income, before any deductions for CCA or CEC, was also $ 47,000. Resources Ltd. had always deducted the maximum amount of CCA and CEC in previous years.

Other information relating to Resources Ltd.s depreciable assets was as follows:

All of the Class 12 assets were acquired in 2015.

The leasehold improvements were made in 2014 at a cost of $240,000.

During 2016, the cost of additions to Class 10 amounted to $ 63,000, while the proceeds from dispositions in this class totaled $ 25,000. In no case did the proceeds of disposition exceed the capital cost of the assets retired, and, there were still assets in the class as of December 31, 2016.

There were no 2016 acquisitions or dispositions in Classes 08, 12, or 13. There were no eligible capital additions or dispositions during 2016.

Required:

Calculate the maximum CCA and CEC deductions that could be taken by Resources Ltd. for the taxation year ending December 31, 2016.

As Resources Ltd.s tax advisor, indicate how much CCA and CEC you would advise them to take for the 2016 taxation year and the specific classes from which it should be deducted. Provide a brief explanation of the reason for your recommendation. In providing this advice, do not take into consideration the possibility that losses can be carried either back or forward

Question 4 (25 Marks)

Acorn Ltd. has a November 30 year end. As of December 01, 2015, Acorn Ltd. had the following UCC balances for its various tangible assets:

Class 01	$705,600
Class 08	330,000
Class 10	185,000
Class 13	175,500

Class 01: A new building was purchased on December 15, 2015 at a cost of $ 950,000, with $ 150,000 of this total being allocated to the land on which the building was situated. The new building was used 50% for manufacturing and processing and 50% for office space. It is allocated a separate Class 01.

The December 01, 2015 balance in Class 01 reflected a single building that was acquired on December 15, 2013 for $ 1,000,000. Of this total, $ 250,000 was allocated to the land in which the building was situated. This building was sold for $ 900,000 on June 5, 2016. At that time, the value of the land was unchanged at $ 250,000.

Class 08: Acorn Ltd. acquired Class 08 assets for $ 240,000 on February25, 2016. Acorn Ltd. traded in older Class 08 assets and they received a trade in allowance of $ 15,000, resulting in a net cost for the new assets of $ 225,000. The capital cost of the assets traded in was $ 60,000.

Class 10: The balance in Class 10 reflected 10 vehicles that were being used by Acorn Ltd.s sales staff. Their original cost totalled $ 230,000. Acorn Ltd. decided it would be more economical to provide its sales staff with leased vehicles. Consequently, on April 02, 2016, the 10 vehicles were sold; Acorn Ltd. received $ 140,000 for those 10 vehicles. The amount received for each vehicle was less than its capital cost

Acorn Ltd. acquired a Mercedes on August 01, 2016, for the use of Acorn Ltd.s accountant. The Mercedes total cost was $ 145,000, plus 7% PST and 5% GST. The accountant drove the Mercedes 65,000 kilometres during the 2016 fiscal year, with only 10,000 kilometres involving employment duties. The accountant was not a shareholder of Acorn Ltd.

Class 13: Some of Acorn Ltd.s business was conducted out of a building that was leased by Acorn Ltd. The lease, which had an initial term of 6 years, could be renewed for 2 additional years at the end of the initial term. Immediately after the lease was signed on July 01, 2014, Acorn Ltd. spent $ 216,000 on leasehold improvements. During June, 2016, an additional $ 54,000 was spent upgrading this property.

Acorn Ltd. purchased an unlimited life franchise for $ 130,000 on June 03, 2014. This franchise was sold on December 12, 2015 for $ 140,000.

Acorn Ltd.s policy was to deduct maximum CCA and maximum CEC amount in each year of operation.

Required:

Calculate the maximum CCA and maximum CEC amount that can be deducted for the year ending November 30, 2016 for Acorn Ltd. Your answer should include the maximum that could be deducted for each CCA class. In addition, indicate the amount of any recapture or terminal loss that resulted from the dispositions during the fiscal year.