Question

Which of the following situations correctly describes the capital cost allowance (cca) rules for class 10.1 vehicles? question 9select one:

a. a passenger vehicle costing $45,000, plus gst/hst at 13%, was purchased in 2019. the maximum cca claim in 2019 would be $10,170.
b. a passenger vehicle with an undepreciated capital cost (ucc) of $10,000 was sold for $8,000. a $2,000 terminal loss would be reported.
c. a passenger vehicle with a ucc of $15,000 was sold for $20,000. recapture of $5,000 would be reported.
d. two passenger vehicles, each costing $40,000 were purchased in 2018. the cars would each placed in their own class 10.1 pool.

Answer 1

The correct CCA rule for Class 10.1 vehicles is when a passenger vehicle with a UCC of $15,000 is sold for $20,000, a recapture of $5,000 is reported. This is because the sale price exceeded the UCC.

Step-by-step explanation:

The Capital Cost Allowance (CCA) rules for Class 10.1 vehicles typically pertain to passenger vehicles costing more than a specified limit set by the Canada Revenue Agency (CRA). The correct situation that describes the CCA rules is option C: when a passenger vehicle with an undepreciated capital cost (UCC) of $15,000 is sold for $20,000, a recapture of income of $5,000 would be reported. This happens because the sale price exceeds the remaining UCC, reflecting a previous deduction for depreciation that was actually not incurred since the sale price was higher.

Option A is incorrect because the maximum CCA claim for a vehicle in 2019 is not $10,170; the CRA sets a limit on the amount that can be claimed for luxury vehicles. Option B describes a terminal loss, which would be correct if the vehicle was the last one in the class or the business was ending. However, this situation lacks context to confirm that it's correct. Option D is incorrect because vehicles costing more than $30,000 before taxes are placed in a separate CCA class (Class 10.1) on an individual basis, not pooled together.