A firm started business on January 1, 2013, and will close down on its December

Question

A firm started business on January 1, 2013, and will close down on its December 31,
2017 year-end. The company uses a fleet of trucks for delivery. The following
transactions relating to the fleet have occurred (Class 10, CCA rate equal to 30
percent).
2013: Purchased six trucks for $70,000 each.
2014: Purchased two trucks for $95,000 each.
2015: Sold two trucks, which had been purchased in 2013, for $75,000 each.
2016: Sold two trucks, which had been purchased in 2014, for $90,000 each.
a) Prepare a schedule showing the effects of these transactions on the Class 10 pool
and any taxable capital gains for the period 2013 to 2017. Use the following
template for your schedule.

b) What additional taxes are paid or received based on the schedule, if the final four
trucks are sold for $25,000 each in 2017?

Year UCC Beginning CCA UCC End Capital Gains 2013 2014 2015 2016 2017

Explanation / Answer

A) SCHEDULE OF THE FIRM ARE AS FOLLOWS-

Capital gain (2015)- $1,50,000 - $83,300= $66,700

ASSUMPTION- Sold at beginning of the year because not mentioned in the question.

value of truck(UCC)-($2,49,900/6*2)=$83,300

UCC OF 4 TRUCKS- 2,49,900- 83,300=1,66,600

Capital gain (2016)=$1,80,000-$1,13,050=$66,950

B) IF FINAL FOUR TRUCKS WHICH HAD BEEN PURCHASED IN 2013 HAVE BEEN SOLD IN 2017 THEN-

SALE PRICE - UCC(AT END) = CAPITAL GAIN AMOUNT

(25000*4)=$1,00,000 - $57,143.8 =$42,856.2

NOTE-1 RATE OF CAPITAL GAIN TAX HAVE NOT BEEN AVAILABLE IN THE QUESTION IF PROVIDED THEN IT WILL BE LEVIED ON $42,856.2

NOTE-2 We use a "Half-Year" rule for determining depreciation in the first year of ownership of an asset.So rate applied for depreciation is 15% in year 2013 and 2014.

YEAR UCC BEGINNING CCA UCC END CAPITAL GAINS 2013 $4,20,000 $63,000 $3,57,000          NIL 2014 $3,57,000+$1,90,000 $1,07,100+$28,500 $2,49,900+$1,61,500          NIL 2015 $1,66,600+$1,61,500 $49,980+$48,450 $1,16,620+$1,13,050      $66,700 2016 $1,16,620 $34986 $81,634      $66,950 2017 $81,634 $24,490.2 $57,143.8      NIL

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