For its taxation year ending December 31, 2020, Axel Ltd. has determined that its Net Income For Tax Purposes, before any deductions for CCA, amounts to $42,000. The Company does not have any Division C deductions, so whatever amount is determined as Net Income For Tax Purposes will also be the amount of Taxable Income for the 2020 taxation year. *This balance reflects leasehold improvements made on January 1, 2018 at a total cost of $126,000. The original term of the lease was 4 years. However, there are two available renewal options, each allowing Axel Ltd. to renew for a period of two years.
During 2020, the cost of additions to Class 10 amounted to $76,000, while the proceeds from dispositions in this class totalled $58,000. In no case did the proceeds of disposition exceed the capital cost of the assets disposed of, and there were still assets in the class as of December 31, 2020.
There were no acquisitions or dispositions in either Class 1 or Class 8 during 2020. However, Axel has received an unsolicited offer to purchase one of its buildings which it is considering.
Required:
A. Calculate the maximum CCA that could be taken by Axel Ltd. for the taxation year ending December 31, 2020. Your answer should include the maximum that can be deducted for each CCA class.
B. As Axel's tax advisor, indicate how much CCA you would advise them to take for the 2020 taxation year and the specific classes from which it should be deducted. Provide a brief explanation of the reason for your recommendation. In providing this advice, do not take into consideration the possibility that losses can be carried either back or forward.

Question

For its taxation year ending December 31, 2020, Axel Ltd. has determined that its Net Income For Tax Purposes, before any deductions for CCA, amounts to $42,000. The Company does not have any Division C deductions, so whatever amount is determined as Net Income For Tax Purposes will also be the amount of Taxable Income for the 2020 taxation year.  *This balance reflects leasehold improvements made on January 1, 2018 at a total cost of $126,000. The original term of the lease was 4 years. However, there are two available renewal options, each allowing Axel Ltd. to renew for a period of two years.
During 2020, the cost of additions to Class 10 amounted to $76,000, while the proceeds from dispositions in this class totalled $58,000. In no case did the proceeds of disposition exceed the capital cost of the assets disposed of, and there were still assets in the class as of December 31, 2020.
There were no acquisitions or dispositions in either Class 1 or Class 8 during 2020. However, Axel has received an unsolicited offer to purchase one of its buildings which it is considering.
Required:
A. Calculate the maximum CCA that could be taken by Axel Ltd. for the taxation year ending December 31, 2020. Your answer should include the maximum that can be deducted for each CCA class.
B. As Axel's tax advisor, indicate how much CCA you would advise them to take for the 2020 taxation year and the specific classes from which it should be deducted. Provide a brief explanation of the reason for your recommendation. In providing this advice, do not take into consideration the possibility that losses can be carried either back or forward.

Quizplus · Accepted Answer

The Answer of For its taxation year ending December 31, 2020, Axel Ltd. has determined that its Net Income For Tax Purposes, before any deductions for CCA, amounts to $42,000. The Company does not have any Division C deductions, so whatever amount is determined as Net Income For Tax Purposes will also be the amount of Taxable Income for the 2020 taxation year.  *This balance reflects leasehold improvements made on January 1, 2018 at a total cost of $126,000. The original term of the lease was 4 years. However, there are two available renewal options, each allowing Axel Ltd. to renew for a period of two years.
During 2020, the cost of additions to Class 10 amounted to $76,000, while the proceeds from dispositions in this class totalled $58,000. In no case did the proceeds of disposition exceed the capital cost of the assets disposed of, and there were still assets in the class as of December 31, 2020.
There were no acquisitions or dispositions in either Class 1 or Class 8 during 2020. However, Axel has received an unsolicited offer to purchase one of its buildings which it is considering.
Required:
A. Calculate the maximum CCA that could be taken by Axel Ltd. for the taxation year ending December 31, 2020. Your answer should include the maximum that can be deducted for each CCA class.
B. As Axel's tax advisor, indicate how much CCA you would advise them to take for the 2020 taxation year and the specific classes from which it should be deducted. Provide a brief explanation of the reason for your recommendation. In providing this advice, do not take into consideration the possibility that losses can be carried either back or forward.

For Its Taxation Year Ending December 31, 2020, Axel Ltd