Shawarma Palace Ltd. was incorporated on January 1, 2018. In addition to operating a luxury restaurant featuring the cuisine of Lebanon, the Company also offers delivery of its famous shawarmas. The Company has a December 31 year end and deducts the maximum CCA each year.
On February 15, 2018, the Company acquires a new building for its operations at a cost of $750,000. Of this total, $500,000 is allocated to the building and $250,000 to the land. The building is being used 100 percent for non-residential purposes of which about 25 percent is classified as manufacturing and processing (the preparation of food and drinks). It is allocated to a separate Class 1.
Furnishings for the building are acquired on March 1, 2018 at a cost of $225,000.
Also on March 1, 2018, the Company acquires 10 vehicles to be used in its delivery operations. The cost of these vehicles is $27,000 each for a total of $270,000.
During 2019, the Company trades in 4 of its old vehicles for more fuel efficient vehicles. The replacement vehicles cost $29,000 per vehicle. The company receives a trade-in allowance of $21,000 for each old vehicle. Also during this year, the Company acquires a luxury vehicle to be used by the Company's CEO. The cost of this vehicle is $89,000.
At the end of the 2020 taxation year, mounting losses force the Company to discontinue its operations. The assets are sold as follows:
• The building is sold for its original cost of $750,000, with $250,000 of this amount being attributed to the land.
• The furniture is sold for $150,000.
• The 6 remaining vehicles that were purchased in 2018 are sold for $72,000. The 4 vehicles that were acquired in 2019 are sold for $100,000.
• The luxury vehicle is sold for $45,000.
Required: Determine the maximum CCA that can be taken in each of the years 2018 through 2020. In your calculations, include and identify the January 1, 2019, January 1, 2020, and January 1, 2021 UCC balances.
In addition, indicate any tax effects resulting from the 2019 and 2020 dispositions.
Ignore GST/HST/PST considerations.
Note: The half year rule was applicable in 2018. In 2019 and subsequent years, the AccII provisions were available.

Question

Quizplus · Accepted Answer

The Answer of Shawarma Palace Ltd. was incorporated on January 1, 2018. In addition to operating a luxury restaurant featuring the cuisine of Lebanon, the Company also offers delivery of its famous shawarmas. The Company has a December 31 year end and deducts the maximum CCA each year.
On February 15, 2018, the Company acquires a new building for its operations at a cost of $750,000. Of this total, $500,000 is allocated to the building and $250,000 to the land. The building is being used 100 percent for non-residential purposes of which about 25 percent is classified as manufacturing and processing (the preparation of food and drinks). It is allocated to a separate Class 1.
Furnishings for the building are acquired on March 1, 2018 at a cost of $225,000.
Also on March 1, 2018, the Company acquires 10 vehicles to be used in its delivery operations. The cost of these vehicles is $27,000 each for a total of $270,000.
During 2019, the Company trades in 4 of its old vehicles for more fuel efficient vehicles. The replacement vehicles cost $29,000 per vehicle. The company receives a trade-in allowance of $21,000 for each old vehicle. Also during this year, the Company acquires a luxury vehicle to be used by the Company's CEO. The cost of this vehicle is $89,000.
At the end of the 2020 taxation year, mounting losses force the Company to discontinue its operations. The assets are sold as follows:
• The building is sold for its original cost of $750,000, with $250,000 of this amount being attributed to the land.
• The furniture is sold for $150,000.
• The 6 remaining vehicles that were purchased in 2018 are sold for $72,000. The 4 vehicles that were acquired in 2019 are sold for $100,000.
• The luxury vehicle is sold for $45,000.
Required: Determine the maximum CCA that can be taken in each of the years 2018 through 2020. In your calculations, include and identify the January 1, 2019, January 1, 2020, and January 1, 2021 UCC balances.
In addition, indicate any tax effects resulting from the 2019 and 2020 dispositions.
Ignore GST/HST/PST considerations.
Note: The half year rule was applicable in 2018. In 2019 and subsequent years, the AccII provisions were available.