i am a newbie and i hope you got some tolerance for a beginner question
i am a freelancer, shooting photos for marriages and other smaller events.
unfortunately my camera got destroyed (it felt down). no insurance. had to replace it.
the class now contains my old camera (destroyed) and the new one (had to replace it). I entered into my tax software the disposition of my old camera with nil proceeds (studied CRA website and it seems like that is the way to go).
however, the UCC did not change, which makes sense because I entered nil proceeds. do I have to reduce the UCC by the remaining value to ensure that I am no longer deprecating the camera?
If the new camera is added to the same “pool” of assets, that pool is not empty, so you cannot write off the remaining balance from the original camera - you can only keep taking CCA at the prescribed rate.
However, you also need to add the cost of the new camera to the existing UCC balance - an “addition” to the pool. So, now your UCC balance should be much higher than the cost of the one camera you still have. But, you will be able to claim more CCA each year. For example:
Cost of original camera = $1,000
Added to CCA class 8 (20%)
Per the half-year rule, first year depreciation = 10% x $1,000 = $100
UCC at end of year = $900
Assume camera was destroyed/replaced during second year.
New camera cost = $1,000
Added to same CCA pool (Class 8), so UCC now = $1,900
Per the half-year rule, first year depreciation = 10% x $1,000 but the remaining $900 can be depreciated at 20% so total CCA = $100 + $180 = $280 for that year.
Note: the above calculation does not account for the new AAII rules, which changes the half-year rule to a 150% rule.
There is one other scenario (which probably doesn’t apply to you) - if the new camera is a significantly different, such that you would put it into a NEW pool (a second Class 8 pool), then the original pool would be empty, and there would be a terminal loss (the entire UCC balance in the original pool would be a deduction in that year).
I am so unbelievable thankful for your time and your detailed explanation
To me that sounds like a beneficial situation for me. I strongly thought that if the camera is gone, I will lose „all my rights“ to write it off as I can not benefit from something which is no in my possession anymore.
And yes, both camera (old and new one) are in the same class, in fact it is even the model.
Do I understand it correctly that I would still record the disposition of the camera for zero proceeds?
@peterz1990 are you an accountant or bookkeeper? If you don’t know how to record the disposition of a capital asset, I suggest you contact a professional (or take some classes).
Yes - you should record the disposition for zero proceeds.
When you sell a business property or when a property you own is expropriated, destroyed, or stolen, you may be able to elect to postpone or defer reporting the capital gain, recapture of capital cost allowance, or business income from disposing of property. Provided you meet certain conditions, you may want to do this when you use the proceeds of disposition of the property to purchase a replacement property. The election may defer the tax consequences on the above amounts until you sell the replacement property.
I am not an accountant nor a bookkeeper, I am an individual on the way to improve my skills. Watching a lot of YT-videos, going through prof. forums (like this one), asking other self-employed people and of course reading the official CRA articles.
Do you have any suggestions about where I can get classes? Or is there someone in here who I can pay for some tax consulting on a hourly base?
H & R Block also offers an introductory Income Tax course.
“What Is The H&R Block Income Tax Course? The H&R Block Income Tax Course is offered to the public and marketed as a way to learn to prepare taxes and maybe get a job working for H&R Block. Sign-ups usually occur in August of each year and the classes usually run September to November.”
It pretty much covers exactly what I need. I mean I am not planning to open a tax business, but I think it will make me sleep better at night because I gain way better knowledge on how to lead my small business in terms of taxes.
