Dresses R Us moved into their new rented premises on January 1, 2019. The term of the lease is 10 years. $8,000 of leasehold improvements were done during January 2019 with further leasehold improvements of $4,500 completed during January 2020. The maximum amount of CCA for 2020 is:

Question

Quizplus · Accepted Answer

The leasehold improvements are considered Class 1 property for the purpose of the CCA system. The CCA for Class 1 property is calculated at a rate of 4% per year. Therefore, the maximum amount of CCA that Dresses R Us can claim for 2020 is:

[(8,000 + 4,500) x 4%] = $660

However, the maximum amount of CCA that can be claimed for the first year is limited to one-half of the annual maximum CCA. Therefore, the maximum amount of CCA that Dresses R Us can claim for 2020 is:

$660/2 = $330

Adding the 2020 CCA to the 2019 CCA:

[($8,000 x 4%) / 2] + ($4,500 x 4%) = $220 + $180 = $400

Therefore, the maximum amount of CCA that Dresses R Us can claim for 2020 is $1,550.

Dresses R Us Moved into Their New Rented Premises on January