UpSky Airways purchased a small jet on January 1 at a cost of $40,000,000. UpSky expects the plane to remain useful for 6 years and to have a residual value of $4,000,000. UpSky is comparing the CCA method used for income tax purposes with the straight-line amortization method.

1. Calculate the amount of CCA, at a rate of 25 percent, that UpSky will be able to claim in its first year. CRA normally requires the half-year rule in the year of acquisition. Is this more or less than what it would show using the straight-line method?

2. Why does the Government of Canada, through the CCA, regulate the amount of amortization that a company can claim for income tax purposes?