Question

Recapture of CCA takes place when​ ________.

A. the UCC ending balance of an asset class is negative at the end of the year AND there are no remaining assets
B. the UCC ending balance of an asset class is negative at the end of the year
C. proceeds from the sale of assets for a given year exceed the CCA taken on the asset class
D. CCA taken on an asset class for the year exceeds the cost of assets within the class

Answer 1

Recapture of CCA occurs when the sale proceeds of an asset exceed the CCA claimed, resulting in additional taxable income to reclaim previous years' tax relief.

Step-by-step explanation:

Recapture of Capital Cost Allowance (CCA) takes place when proceeds from the sale of assets for a given year exceed the CCA taken on the asset class. This typically occurs when the disposal of an asset results in generating revenue that exceeds the total undepreciated capital cost (UCC) of that asset. The difference between the sale proceeds and the UCC that's recaptured is generally included in the business's income and is taxable. It is designed to reclaim tax relief given in previous years when the asset's CCA was claimed.