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Posted on Apr 24, 2021

Vinny Crafters is an unincorporated business which provides courier services within the city of Sudbury. It has a taxation year that ends on December 31

Vinny Crafters is an unincorporated business which provides courier services within the city of Sudbury. It has a taxation year that ends on December 31 and plans to deduct the maximum CCA each year.

Vinny Crafters began operating on May 1, 2018 by acquiring a new building at a total cost of $326,000. Of this total, $53,000 is allocated to the land on which the building is situated. As it will be used 100 percent for non-residential purposes other than manufacturing, it is allocated to a separate Class 1.

Furnishings for the building are acquired on June 1, 2018 at a cost of $85,000.

Desktop computers to coordinate operations were acquired on June 1, 2018 at a cost of $6,000.

Also on June 1, 2018, the business acquires 12 vehicles to be used by its couriers. The cost of these vehicles is $23,000 each for a total of $276,000.

During 2019, the business trades in 5 of its old vehicles for more fuel efficient vehicles. The replacement vehicles cost $27,000 per vehicle. The company receives a trade-in allowance of $16,000 for each old vehicle. Also during 2019, the Company acquires a luxury vehicle to be used by Vinny, the owner of the business. The cost of this vehicle is $103,000.

During 2020, Vinny and five of his drivers are charged with smuggling counterfeit goods. Vinny Crafters is closed down on December 31, 2020 and, before closing, Vinny sells the assets as follows:
• The building is sold for $342,000, with $53,000 of this amount being attributed to the land.
• The remaining 7 vehicles that were purchased in 2018 are sold for $73,000. The 5 vehicles that were acquired in 2019 are sold for $62,500. The amount received for each vehicle was less than its capital cost.
• The furniture is sold for $12,300.
• The computers are sold for $1,500.
• The luxury vehicle is sold for $63,800.

Required: Determine the maximum CCA that can be taken in each of the years 2018 through 2020. In your calculations, include and identify the UCC balances for January 1, 2019, January 1, 2020, and January 1, 2021.

In addition, indicate any tax effects resulting from the 2019 and 2020 dispositions. Ignore GST/HST/PST considerations.

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The maximum CCA and UCC balances at yearend of that Vinny Crafters are as follow 2018 CCA that may be claimed is 59740 and also the sum of UCC balances as of January 1 2019 is 5802602019 CCA that may be claimed is 104711 and also the sum of UCC balances as of January 1 2020 is 5605492020 CCA that may be claimed is 0 and therefore the sum of UCC balances as of January 1 2021 is 0Tax effects that result from the disposition for Vinny Crafters are as followsFor 2019 on the exchange of vehicles it incurred a loss of 35000 its taxdeductible from the incomeFor 2020 the number of Terminal Loss is 136828 rather like financial loss may be deducted from the revenues for tax calculationsExplanationAs per CRA The CCA rate of a building ie Class 1 is 4 but if at the top of the twelvemonth at the most 90 of the property is getting used for nonresidential uses in Canada the building shall be answerable for the extra allowance of two percent that creates a complete of 6 for depreciationFor furnishing ie Class 8 the CCA rate is 20For Class 50 personal computer the CCA rate is 55For Class 10 Vehicles those that are under the value of 30000 is 30 And vehicles that cost over 30000 are considered to be Luxury Vehicles therefore these are a part of Class 101 assets the most amount of luxury vehicles that may be considered for CCA purposes is 30000 plus HST the rate is 30 also on theseIf people are selling the depreciable property during the year people must also deduct a lesser sum from UCCProceeds of property disposal less the associated expenditures and fees orThe propertys opportunity cost 6 If at the completion of the year the UCC is positive and there are not any assets left in a very certain class thats a terminal loss as compared to a financial loss the full amount of a terminal loss during that year is excluded from the income7 The CRA companies to cut back the worth of the property by half for the year of acquisition and charge depreciation thereon By following the aforesaid conditions and rules of CRA we are able to evaluate the utmost CCA and UCC balance ... blur-text-image