Question

A $95,000 investment is to amortized for tax purposes using the maximum CCA available.
If the investment represents a fleet of automobiles for a telephone utility, what will be the allowable CCA rate?
How much will the addition of the automobiles increase the allowable dollar CCA in Year 1? Year 2?
If the investment had been for machinery, what difference would that have made in the CCA rate allowed?
What difference will it make when the cars are scrapped for next to nothing after five years? (the company’s autos tend to accumulate very high mileage, and the company has adopted the practice of giving them away to interested employees when their usefulness to the company ceases)

Answer 1

The allowable CCA Rate will be 30%. Vehicles classed as "Motor Vehicles" use CCA Class 10 and the allowable CCA rate for this Class is 30%.

The allowable dollar CCA in Year 1 will be $95000*0.30 =$28,500

The allowable dollar CCA in Year 2 will be ($95000-28,500)*0.30 =$19,950

Machinary fall under Class 8 and the CCA rate would be 20% in this case making a difference of 10% if compared to automobile.

The value left at the end of 5th year after deducting CCA will be reduced for the purpose of tax calculation.