During the current year, Denos Corporation incurred costs of $45,000 for leasehold improvements to its newly rented building. The lease was signed in the current year for an initial term of three years plus four successive options to renew the lease, each for an additional one year term. Which one of the following amounts represents the maximum capital cost allowance claim in the current year?

Question

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The maximum capital cost allowance claim in the current year is $13,500, which is calculated as follows:Capital cost of leasehold improvements: $45,000Number of years in the lease term: 3 (initial term) + 4 (renewal options) = 7Maximum capital cost allowance rate: 20%Maximum capital cost allowance claim: $45,000 x 20% x 3/7 = $13,500

During the Current Year, Denos Corporation Incurred Costs of $45,000