Comments on: Deducting Automobile Expenses For Work

By: Ray

Ray — Thu, 07 Apr 2011 14:57:52 +0000

Thanks Dani…from what I have read and what you provided, if you change a vehicle’s use from business to personal you have “disposed” of it.
16. subsection 1100(2.5) of the Regulations permits an individual to claim, in the year of disposition of a “passenger vehicle” that was included in class 10.1 and that was owned by the individual at the end of the preceding taxation year, one-half the amount that the individual would have been permitted to claim as capital cost allowance had the vehicle not been disposed of.

It also states that if you have a class 10.1 vehicle (>$30000 at purchase) one cannot claim “recapture CCA” or “terminal loss”…hmmm trying to get my head around this…almost prepared to just forego this CCA for my first vehicle to avoid any flags…

By: Dani_S

Dani_S — Wed, 06 Apr 2011 23:37:23 +0000

Ray, I found this (at http://www.cra-arc.gc.ca/E/pub/tp/it478r2/it478r2-e.html#P112_13245)

Depreciable Property Not Disposed of After Ceasing to Carry on a Business

¶ 8. If a business is discontinued, the taxpayer is not entitled to claim a terminal loss for the UCC of a particular class of depreciable property that was used in the business unless and until all the assets in the class are disposed of (see the requirement in ¶ 7(b)). Thus, for example, if the taxpayer retains property of the class without using it for any other purpose, no terminal loss in respect of the class can be claimed. Furthermore, the taxpayer is not entitled to claim CCA on the property in any subsequent year unless it is used in that year to earn income from a business or property as required for purposes of a deduction under paragraph 20(1)(a) of the Act and subsection 1100(1) of the Income Tax Regulations. If, on the other hand, the taxpayer commences to use the property for a non-income-producing purpose, there is a deemed disposition of the property at that time at its fair market value pursuant to paragraph 13(7)(a). Such a deemed disposition could result in a CCA recapture or possibly in a terminal loss (the latter would require that no other property remain in the class).

So looks like, because we’re continuing to use for non-income producing purposes, we have to calculate a terminal loss for CCA purposes using the market value of the car as the deemed proceeds.

By: Dani_S

Dani_S — Wed, 06 Apr 2011 22:45:42 +0000

@Ray

Have you found anything yet? My husband is in EXACTLY the same situation as you. Struggling to find anything to explain how to deal with this.

By: Ray

Ray — Tue, 05 Apr 2011 22:30:35 +0000

I OWN my vehicle and used it for business from Jan to May 2010…I then LEASED a second new vehicle which I then used exclusively for business from June to Dec 2010…(note that I did not dispose of the first vehicle and continue to own it as a second car used exclusively for personal use).

My question is how do I address this for 2010 taxes?…I can use my lease costs for my new vehicle from June to Dec 2010 but am I allowed to also apply CCA to my first vehicle that I used from Jan to May 2010?

Thank you in advance!…reviewed all CRA documents and no direction given in this particular situation.

By: Tax Guy

Tax Guy — Sat, 19 Feb 2011 06:02:04 +0000

It all boils down to a system.

Long ago, when I used my car for business, I had an inexpensive daytimer. I would write my mileage at the beginning of the work day and end of work day. At the end of the week, I knew exactly the percentage business use.

In the end,the CRA is looking for a system and reasonableness. They don’t expect perfection.

By: Michael James

Michael James — Fri, 18 Feb 2011 23:23:52 +0000

I tried to do this for my business, but it was unbelievably tedious to maintain a logbook and to keep track of all the little costs associated with a car. The accounting requirements from CRA for claiming vehicle costs are unreasonably onerous. It is honest people who are punished the most. Less honest people will just make up a plausible-looking logbook.