Automobile capitalization on T1

Forum|Forum|3 years ago
April 28, 2023
1 reply
2 views

I have a client who bought a Tesla in 2022 and he uses it for business 90% of the time. When I capitalize the car, I have 2 options. One is to capitalize 90% of the purchase price by indicating personal 10% on T2125 asset details and claim CCA without adjustments. The other option is to capitalize 100% of the purchase price (no personal portion) and adjust CCA by recording KM travelled in carrying on your activity and Total KM.

Assuming purchase price of $59,000, both options provide the same CCA but there is a remaining UCC for the second option while no UCC balance for first option.

Which option is correct?

ProFile (Canada)

This topic has been closed for replies.

Best answer by janisbossenberry

The reason you are getting zero UCC carry forward looks like it is due to the Immediate Expensing being utililized when you put the vehicle on the T2125. Note that you have to reduce the amount of CCA claimed under the Immediate Expensing rule to the amount of the net income before CCA from the business. You would have to override the CCA expense on the T2125 CCA form. The remaining UCC then goes into a different column and the normal 30% is claimed.

If a passenger vehicle is used substantially all of the time for business (90% is substantially all), then you can capitalize the entire cost and then restrict it by the number of KM driven. That would be best if the 90% varies from year to year (which presumably it would). Keep in mind that travel from place of business to home is personal......

Also, remember that this is a passenger vehicle so the capital cost is restricted to $34,000 plus GST & PST on $34,000.

J

janisbossenberryAnswer

Level 7

The reason you are getting zero UCC carry forward looks like it is due to the Immediate Expensing being utililized when you put the vehicle on the T2125. Note that you have to reduce the amount of CCA claimed under the Immediate Expensing rule to the amount of the net income before CCA from the business. You would have to override the CCA expense on the T2125 CCA form. The remaining UCC then goes into a different column and the normal 30% is claimed.

If a passenger vehicle is used substantially all of the time for business (90% is substantially all), then you can capitalize the entire cost and then restrict it by the number of KM driven. That would be best if the 90% varies from year to year (which presumably it would). Keep in mind that travel from place of business to home is personal......

Also, remember that this is a passenger vehicle so the capital cost is restricted to $34,000 plus GST & PST on $34,000.

G

groobiAuthor

Level 4

Thank you for replay Janis,

It helped a lot. Where can I find info about automobile capitalization depending on business use %? Appreciated.

J

janisbossenberry

Level 7

CRA's guide #T4002 has lots of good information. Chapter 4, pages 77 to 78 have some examples. Also look at the definitions for passenger vehicle, zero-emissions vehicles, immediate expensing, etc. pages 7 to 9.

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