A piece of equipment is in Class 7 with a maximum CCA rate of 15%.The income tax rate is 40%.The tax savings from the CCA tax shield on this equipment for the first year was $1,500.What must have been the original capital cost of the equipment?

Question

Quizplus · Accepted Answer

The tax shield is calculated as the CCA rate multiplied by the original cost and the tax rate. Given the tax savings of $1,500, we can set up the equation: 0.15 * Original Cost * 0.40 = $1,500. Solving for the original cost gives $25,000.

A Piece of Equipment Is in Class 7 with a Maximum