Question

Javan Co has the following related to Class 8​ assets:

Beginning​ Balance: $40,000

Javan disposes of all assets within the class during the​ year, for proceeds of disposition of ​$20,000.

If Javan Co has no additions for the​ year, and there are no assets remaining in the class at the end of the​ year, which of the following will​ occur?

Choose the correct answer.

A. a terminal loss of ​$20,000

B. recapture of ​$20,000 of CCA

C.recapture of ​$16,000 of CCA

D.a terminal loss of ​$16,000

Answer 1

Answer	Option A
Column 1	Column 2	Column 3	Column 4	Column 5	Column 6
Class	Cost of undepreiciable asset	Cost of Acquisition	Adjustments	Sale Proceeds	Undepreciated Capital Cost	Terminal Loss
Class 8	40000	0	0	20000	20000	20000
					(Cloumn 2-Column 3)
Column 5 – Proceeds of dispositions during the year
For each class, you usually enter the total proceeds of disposition received or are entitled to be received for property disposed of during the year.
However, if you disposed of the property for more than its capital cost, enter the capital cost, not the actual proceeds of disposition.
A capital gain results when you dispose of a depreciable property for more than its capital cost.
However, losses on depreciable property do not result in capital losses. They may result in terminal losses. See column 6 for more details about terminal losses.
Column 6 – Undepreciated capital cost
You cannot claim CCA in the following situations:
the amount in column 6 is positive, and no property is left in that class at the end of the tax year (a terminal loss)
the amount in column 6 is negative (a recapture of CCA)
Terminal loss
A terminal loss results when you dispose of all the property in a particular class and there is an amount of undepreciated capital cost left in column 6.
You have to deduct the terminal loss from income. For details, see example 1 under the heading "Schedule 8 examples" that follows.
Recapture of CCA
If the amount in column 6 is negative, you have a recapture of CCA.
A recapture of CCA occurs when the proceeds of disposition in column 5 are more than the total of columns 2 and 3, plus or minus the amount in column 4 of that class.