Jim Smith owns a rental property which had a UCC of $85,000 at the beginning of 20x0. After all allowable expenses other than CCA, Jim's total rental income was $1,000 in 20x0 and $10,000 in 20x1. Jim always deducts the maximum CCA allowed. What is the UCC for his rental property at the end of 20x1? (The property is a Class 1 building amortized at 4%.)

Question

Quizplus · Accepted Answer

To calculate the UCC at the end of 20x1, we need to calculate the CCA for the year and subtract it from the UCC at the beginning of the year.

The rental property is a Class 1 building, so the CCA rate is 4%. The maximum CCA that can be claimed for the property in 20x0 is 4% of the UCC at the beginning of the year, which is $85,000 x 4% = $3,400.

Since Jim always deducts the maximum CCA allowed, we can assume that he claimed $3,400 in CCA for 20x0.

To calculate the CCA for 20x1, we need to subtract the UCC at the end of 20x0 from the UCC at the beginning of 20x1. The UCC at the end of 20x0 is $85,000 - $3,400 = $81,600.

The UCC at the beginning of 20x1 is therefore $81,600. The maximum CCA that can be claimed for the property in 20x1 is 4% of the UCC at the beginning of the year, which is $81,600 x 4% = $3,264.

Since Jim always deducts the maximum CCA allowed, we can assume that he claimed $3,264 in CCA for 20x1.

To calculate the UCC at the end of 20x1, we subtract the total CCA claimed in 20x0 and 20x1 from the UCC at the beginning of 20x1:

$81,600 - $3,400 - $3,264 = $74,936

Therefore, the UCC for his rental property at the end of 20x1 is $80,640.

Jim Smith Owns a Rental Property Which Had a UCC