Computer Wizards Ltd. has determined that its Net Income for Tax Purposes, before any CCA deductions, was $80,000, for the taxation year ending December 31, 2020. As Computer Wizards Ltd. does not have any Division C deductions, Taxable Income before any deductions for CCA would also amount to $80,000.

On January 1, 2020, Computer Wizards Ltd. had the following UCC balances:

* This balance reflects leasehold improvements made on January 1, 2018 at a total cost of $126,000. The original term of the lease was 4 years. However, there are two available renewal options, each allowing Computer Wizards Ltd. to renew for a period of two years.

• During 2020, the cost of additions to Class 8 amount to $90,000, while the proceeds from dispositions in this class totaled $40,000. In no case did the proceeds of disposition exceed the capital cost of the assets retired, and there were still assets in the class as of December 31, 2020.

• During 2020, the cost of additions to Class 10 amounted to $70,000, while the proceeds from dispositions in this class totalled $50,000. In no case did the proceeds of disposition exceed the capital cost of the assets disposed of, and there were still assets in the class as of December 31, 2020.

• The company plans to sell the BMW in January 2021, and expects to receive about $105,000.

• All of the Class 12 assets were acquired in 2019.

• There were no acquisitions or dispositions in either Class 1 or Class 12 during 2020.

• Computer Wizards Ltd. has received an unsolicited offer to purchase one of its buildings which it is considering.

During the preceding 4 years, Computer Wizards Ltd. reported the following Taxable Income:

Required:

1. Calculate the maximum CCA that could be taken by Computer Wizards Ltd. for the taxation year ending December 31, 2020. Your answer should include the maximum that can be deducted for each CCA class.

2. As Computer Wizards Ltd.’s tax advisor, indicate how much CCA you would advise the company to take for the 2020 taxation year, and the specific classes from which it should be deducted. Provide a brief explanation of the reasons for your recommendations. In determining your solution, ignore the possibility that 2020 losses can be carried forward to subsequent taxation years.

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Class 1 (Two Buildings) $ 700,000 Class 8 210,000 Class 10 140,000 Class 10.1 (BMW - Cost $ 195,000) Class 10.1 (Mercedes - Cost $ 240,000) 20,000 40,000 Class 12 50,000 Class 13* 94,500 Class14.1 (Pre January 01, 2017 Acquisition) 195,300 Class 1 (Two Buildings) $ 700,000 Class 8 210,000 Class 10 140,000 Class 10.1 (BMW - Cost $ 195,000) Class 10.1 (Mercedes - Cost $ 240,000) 20,000 40,000 Class 12 50,000 Class 13* 94,500 Class14.1 (Pre January 01, 2017 Acquisition) 195,300

Answer rating: 100% (QA)

A The Maximum amount of CCA that can be claimed by Computer Wizards Ltd is 210515 B It is recommended to adopt a CCA claim of 80000 for the year 2020 For claiming such CCA of 80000 the asset classes a... View the full answer