@obhorst
Came across a term called basic tax content
Guide RC4022
Page 7
Basic tax content – of a property generally means the
amount of the GST/HST that was payable for your last
acquisition of the property, and for any improvements you
made to the property since that last acquisition, less any
amounts that you were, or would have been, entitled to
recover (for example, by rebate or remission, but not by
input tax credits). The calculation for the basic tax content
also takes into account any depreciation in the value of the
property since you last acquired it (for example, when you
purchased it or were last considered to have purchased it).
You may have to calculate the basic tax content of a
property if you are a registrant and you increase or
decrease your use of the property in your commercial
activities. For more information, see “Calculating the basic
tax content” on page 24.
Page 22
New registrants
If you are a new registrant, and you have been a small
supplier immediately before you became a registrant, you
may be eligible to claim an ITC for the GST/HST paid or
payable on property such as capital property, real property,
and inventory that you had on hand to use in your
commercial activities at the time you became a registrant.
We consider that you bought the property at that time and
paid GST/HST equal to the basic tax content of the
property. For more information, see “Change-in-use rules
for capital personal property” on page 24.
Page 24
Calculating the basic tax content
The following basic tax content formula in its simplified
form can be used by most registrants.
(A - B) × C
where:
A is the GST/HST payable for your last acquisition of the
property and for later improvements you made to the
property;
B is any rebate or refund you were entitled to claim (or
would have been entitled to claim if you had not been
entitled to claim an ITC) for the GST/HST payable for
your last acquisition of the property and for later
improvements you made to it, but not including ITCs
you were entitled to claim; and
C is the lesser of:
– 1; and
– the fair market value of the property at the time of the
change in use divided by the total cost (not including
the GST/HST) for your last acquisition of the property
and for later improvements you made to it.
My example:
Non-registrant business purchases a computer for business use on June 1 and becomes a registrant on July 1st. The computer cost was $1000.00 + $130.00 (HST)**
For conservative purposes the computers FMV is $700 one month later
According to the above formula I get the following:
A = $130
B = $0
C = $700/1000
ITC = $130 * ($700/$1000)
= $91.00
Thoughts?