Jean Brochet uses an automobile in his unincorporated business. It cost $53,000 in 2019, with maximum CCA being deducted in that year. The purchase was financed with a bank loan of $37,000. For 2020, the interest on this loan was $4,440. The automobile is used exclusively for business purposes, with the 2020 operating costs totaling $7,500. In determining his 2020 business income, his maximum automobile related deduction will be:

Question

Quizplus · Accepted Answer

The maximum deduction includes the CCA for the automobile, which is calculated as 30% of the undepreciated capital cost (UCC) after the first year deduction, plus the interest on the loan and the operating costs. The CCA for 2020 would be 30% of the remaining UCC after the 2019 deduction. The interest on the loan and operating costs are fully deductible as the car is used exclusively for business.

Jean Brochet Uses an Automobile in His Unincorporated Business