Munro Limited reports the following information in its tax files covering the five-year period from 2015 to 2019. All assets are Class 10 with a 30% maximum CCA, and no capital assets had been acquired before 2015.
2015 Purchased assets A, B, and C for $20,000, $8,000, and $1,200, respectively.
2016 Sold asset B for $7,000; bought asset D for $4,800.
2017 Purchased asset E for $5,000; received an investment tax credit of $1,000.
2018 Sold asset A for $9,900 and asset C for $1,800.
2019 Asset D was destroyed by fire and was uninsured; asset E was sold to an employee for $500.
Instructions
(a) Prepare a capital cost allowance schedule for Class 10 assets covering the 2015 to 2019 period.
(b) Identify any capital gains, terminal losses, or recapture of CCA and indicate how each would be taxed.
(c) You have been hired as the tax advisor of Munro Limited. Munro is anticipating low income levels, possibly losses, over the next couple of years due to restructuring. However, management anticipates that income levels will be substantially higher than historical levels in the subsequent three to four years. Munro also anticipates purchasing a number of new assets at the beginning of fiscal 2025, as management had been told that assets must be purchased in the first half of the year to take advantage of the half-year rule. Munro is a private company following ASPE. Provide advice, if any, with respect to the company's CCA policy.