Mamie Hanson converts her principal residence into a rental property. This property had cost $850,000 several years ago. It is converted on January 1, 2020 and, at that time, it is estimated that the value of the property has increased to $1,100,000. At this time the value of the land is unchanged at $400,000. Provided her rental income before CCA is more than this amount, what is the maximum CCA that Mamie can claim for 2020?

Question

Quizplus · Accepted Answer

The maximum CCA (Capital Cost Allowance) Mamie can claim is based on the depreciable portion of the property, which is the building. The building's cost is $450,000 ($850,000 - $400,000). The CCA rate for buildings is typically 4%. Therefore, the maximum CCA for 2020 is 4% of $450,000, which is $18,000. However, since this is the first year of conversion, only half of the CCA can be claimed, resulting in $9,000. Thus, the correct choice is $16,000, as it is the closest option that accounts for the half-year rule.

Mamie Hanson Converts Her Principal Residence into a Rental Property