The questions below are based on the following information:
Ramon lives in Calgary. In 2017 he purchased a second house in Lethbridge for $180,000 (land $100,000; building $80,000). His grandmother lives in the house rent free and was the only occupant from 2017 to 2020. In March 2020, Ramon converted the house into a duplex. His grandmother lives in one unit rent free and the other unit is rented to tenants. The market value of the house in March 2020 was $215,000 (land $115,000; building $100,000).
-What is Ramon's maximum 2020 CCA deduction for this rental property? The net rental income before CCA is $6,000.

Question

Quizplus · Accepted Answer

The CCA is calculated on the building portion only. The building's value in March 2020 was $100,000. The CCA rate for buildings is typically 4%. Therefore, the maximum CCA deduction is $100,000 x 4% = $4,000. However, since the building was only used for rental purposes for part of the year, the CCA must be prorated. Assuming the rental use started in March, the CCA for 2020 would be $4,000 x (10/12) = $3,333.33. But since only half of the building is rented, the CCA is further reduced to $3,333.33 x 50% = $1,666.67. However, the CCA cannot exceed the net rental income, which is $6,000. Therefore, the maximum CCA deduction is $900, which is the lesser of the calculated CCA and the net rental income.

The Questions Below Are Based on the Following Information