Votex Inc. closes its books on December 31 of each year. On January 1, 2020, the following information on the CCA classes of the business was contained in its records:
Class 1 - The buildings in Class 1 were acquired in January, 2009 at a cost of $734,000, with $84,000 of this total being allocated to land. The UCC balance on January 1, 2020 was $562,154.
Class 8 - The equipment in Class 8 was acquired in January, 2014 at a cost of $78,500. The UCC balance on January 1, 2020 was $23,520.
Class 10 - The vehicles in Class 10 were acquired in June, 2017 at a total cost of $82,000. The UCC balance on January 1, 2020 was $34,153.
During the 2020 fiscal year, the following transactions occurred:
Sale Of Equipment - As the result of an extensive analysis, it is decided that it would be better to sell the existing equipment and to replace it with improved equipment that will be leased. The old equipment is sold for $32,500.
Sale Of Buildings - A similar decision is made with respect to the buildings. They are sold for $825,000 and replaced with leased premises. Of the $825,000 received, $100,000 is for the land on which the buildings are situated. The lease term is for 4 years with no options for renewal. A total of $81,000 is spent on leasehold improvements to make the buildings more suitable for the business.
Sale Of Vehicles - The Class 10 vehicles were sold during the current year and replaced with leased vehicles. The sale proceeds totaled $27,500 with no vehicle being sold for more than its cost.
Sale Of Goodwill - In order to further streamline its operations, Votex Inc. sells off a portion of its operations to another company. No depreciable or tangible capital assets were disposed of in this transaction. However, an amount of $225,000 was received for the goodwill of this portion of the business.
Required: For the taxation year ending December 31, 2020 calculate the maximum CCA that can be deducted by Votex Inc. for each CCA class. In addition, calculate the January 1, 2021 UCC balances and indicate any other tax consequences that would result from the described transactions.

Question

Quizplus · Accepted Answer

The Answer of Votex Inc. closes its books on December 31 of each year. On January 1, 2020, the following information on the CCA classes of the business was contained in its records:
Class 1 - The buildings in Class 1 were acquired in January, 2009 at a cost of $734,000, with $84,000 of this total being allocated to land. The UCC balance on January 1, 2020 was $562,154.
Class 8 - The equipment in Class 8 was acquired in January, 2014 at a cost of $78,500. The UCC balance on January 1, 2020 was $23,520.
Class 10 - The vehicles in Class 10 were acquired in June, 2017 at a total cost of $82,000. The UCC balance on January 1, 2020 was $34,153.
During the 2020 fiscal year, the following transactions occurred:
Sale Of Equipment - As the result of an extensive analysis, it is decided that it would be better to sell the existing equipment and to replace it with improved equipment that will be leased. The old equipment is sold for $32,500.
Sale Of Buildings - A similar decision is made with respect to the buildings. They are sold for $825,000 and replaced with leased premises. Of the $825,000 received, $100,000 is for the land on which the buildings are situated. The lease term is for 4 years with no options for renewal. A total of $81,000 is spent on leasehold improvements to make the buildings more suitable for the business.
Sale Of Vehicles - The Class 10 vehicles were sold during the current year and replaced with leased vehicles. The sale proceeds totaled $27,500 with no vehicle being sold for more than its cost.
Sale Of Goodwill - In order to further streamline its operations, Votex Inc. sells off a portion of its operations to another company. No depreciable or tangible capital assets were disposed of in this transaction. However, an amount of $225,000 was received for the goodwill of this portion of the business.
Required: For the taxation year ending December 31, 2020 calculate the maximum CCA that can be deducted by Votex Inc. for each CCA class. In addition, calculate the January 1, 2021 UCC balances and indicate any other tax consequences that would result from the described transactions.

Votex Inc Closes Its Books on December 31 of Each Year