Posted on: 18-12-13 15:50:32
Hi All,
What is the maximum applicable CCA for the following items used for business purposes?
Business(self employed) is yet to be incorporated and assets have not yet been purchased.
1) Computer Hardware(laptops, desktops).
2) Office furniture
3) Cellular Phone/s
4) For an asset purchased in December, 2013-- will depreciation be calculated for the whole year(2013)?
5) Would it be better to purchase assets only after incorporation?
6) Are there any restrictions within the first year of incorporation for claims to be made?
Sorry for the whole battery of questions. 
I am a novice in these matters, however I would like to do little bit of my own research before going to an accountant.
Quote:
Originally posted by elmer fudd
Hi All,
What is the maximum applicable CCA for the following items used for business purposes?
Business(self employed) is yet to be incorporated and assets have not yet been purchased.
1) Computer Hardware(laptops, desktops).
2) Office furniture
3) Cellular Phone/s
4) For an asset purchased in December, 2013-- will depreciation be calculated for the whole year(2013)?
5) Would it be better to purchase assets only after incorporation?
6) Are there any restrictions within the first year of incorporation for claims to be made?
Sorry for the whole battery of questions.
I am a novice in these matters, however I would like to do little bit of my own research before going to an accountant.
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Just go through this list posted under this. Use this as a guide line to understand it. If you are using an accountant, he will guide you with proper allowable deductions, otherwise you can get guides from CRA to work with prior to the year end tax filing. Six more months to go.
http://www.cra-arc.gc.ca/tx/bsnss/tpcs/slprtnr/rprtng/cptl/dprcbl-eng.html
Most of us start a company and then incorporate it. We buy an item as and when the need arises. So, you are allowed to bring in all of your purchases into the Incorporated company and then use the depriciation that the CRA allows. Depriciation is pro rated for the time you have the item in the firm for your use.
There was a year they allowed total write off for the computers purchased for use. See if it is still permitted. If so, you are in luck.
Also read the examples provided for guidance. Some software used in taxation will give not only the write ups, it will do all of the job that an accountant does. The cost is peanuts compared to what you pay the accountant. But you have to generate the smarts for it.
Good Luck.
FH.
I think there are even books at Chapters which focus on the business expenses and deductions.
Got your PM.
What I find good about the tax software is, that there is a small write up on each of the subject that you want to know. It also takes you to the CRA links. Then, when you want to explore a certain scenario, such as salary or Dividend, it helps you play with it and maximize the benefits for the Incorporated entity.
Time, a commodity at a premium, when you get quick answers, helps with a FAST SOLUTION. You can always learn the FIVE 'W's at a later date. But use the local libraries extensively and improve upon your basic fundas(mentals)
FH.
Hello Elmer Fudd,
I hope you and everyone has had a great start to the new year!
With regards to your questions, the CCA rates of depreciation are below:
1) computer hardware - 55%
2) office furniture - 20%
3) cellular phone - 20% or 55%, depending on the aggregate amount of the cell phones.
4) for an asset purchased even on the last day of the year, the depreciation can still be claimed in the year. However, for the first year, the CCA is reduced by half as per the half-year rule (except some specific classes).
5) not sure what you mean here. Would you sell the asset to the corporation if it wasn't the corporation's to begin with?
6) half-year rule is a restriction in the first year of acquisition of the asset
I hope all of this helps!
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Madan Chartered Accountant team
http://www.madanca.com" rel="nofollow">LINK
Thanks for the reply Amadan.
Quote:
Originally posted by Amadan123
5) not sure what you mean here. Would you sell the asset to the corporation if it wasn't the corporation's to begin with?
One hasn't incorporated the company yet, but has come across some good deals and has purchased items for the future company(in the same year it is going to be incorporated).
How does the proprietor set the price when he sells the assets to the company? Is it complicated?
Hello elmer fudd,
The individual/sole proprietor can sell the assets to the corporation. If the value of the asset has increased, then there may be some capital gains for the individual. But if the sale is being made within the same year, maybe the appreciation in value will be negligible?
With regards to valuation of the asset, you will have to determine what the reasonable selling price would be to anyone else in the market. You should do your due diligence and research some figures for the selling price. The main point is this: would anyone else, under similar circumstances, purchase the assets at that same price? This is important especially if the sole proprietor and the corporation are related - because then there is a possibility of having a 'non-arm's-length' transaction.
I hope that makes sense.
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Madan Chartered Accountant team
http://www.madanca.com" rel="nofollow">LINK
