Five years ago, J-Hi Corp.bought a paper cup making machine for $50,000.Assume the machine is the only asset in its class.The company has just sold the machine for $35,000.The UCC of the asset class just before the sale is $15,000.What are the tax consequences of this sale?
A)There is zero tax consequence since the machine was sold for less than its acquisition cost.
B)A capital loss of $15,000.
C)A CCA recapture of $20,000.
D)A terminal loss of $20,000.

Question

Quizplus · Accepted Answer

The UCC of the asset class just before the sale was $15,000, but the company sold the machine for $35,000. This means that J-Hi Corp. received more than the UCC, resulting in a recapture of CCA (capital cost allowance) of $20,000. Therefore, the tax consequence of this sale is a CCA recapture of $20,000.

Five Years Ago, J-Hi Corp