Robert bought a rental property ten years ago for $320,000, with $80,000 of the purchase price allocated to the land. Over the ten years, he claimed CCA such that his UCC at the beginning of this year for the building was $196,000. Robert sold the property this year for $520,000, with $180,000 of the sale price allocated to the land. Which of the following statements is correct?

Question

Quizplus · Accepted Answer

Recapture occurs when the sale price of an asset exceeds its undepreciated capital cost (UCC). Robert's UCC for the building was $196,000. The original purchase price minus the land cost ($320,000 - $80,000 = $240,000) gives the building's original cost. The sale price allocated to the building is $520,000 - $180,000 = $340,000. The recapture is the difference between the sale price of the building portion and its UCC: $340,000 - $196,000 = $144,000. However, since the recapture cannot exceed the total CCA claimed, which is the difference between the original cost of the building and its UCC ($240,000 - $196,000 = $44,000), the correct recapture amount is $44,000.

Robert Bought a Rental Property Ten Years Ago for $320,000