Suppose a firm has a negative UCC balance. They:
A) Can claim the amount as a tax deductible expense.
B) Must add the amount (as a positive number) to their taxable income.
C) Should sell off all items in the asset pool.
D) Can calculate CCA for the year using the negative balance.
E) Should use the negative amount as a future tax loss.

Question

Quizplus · Accepted Answer

When a firm has a negative UCC (Undepreciated Capital Cost) balance, it indicates that the disposal proceeds of the assets exceed their book value. The firm must add this negative balance as a positive number to their taxable income, effectively treating it as a recapture of capital cost allowance (CCA) previously claimed.

Suppose a Firm Has a Negative UCC Balance