Motor Vehicle (CCA not claimed)

Tax Topics
1

Vehicle purchased in 2019 (2017 model).
Owner of vehicle started a sole proprietorship in 2021 - used it 80% for business.

I looked at 2021 return and no CCA was claimed on vehicle (maybe he didn’t know how to claim it/previous preparer forgot).

I see a prorated amount of the fuel, interest, and insurance expenses were claimed on 2021 return but again no CCA was claimed.

The vehicle was used 100% for business in 2022.
What cost amount should I use for this vehicle?

I know this topic has been discussed before but I would like to know others’ current thoughts on this.

2

I recall a similar post a few years ago, and a wise practitioner responded - calculate what the depreciated value would have been by the end of 2021, and use that as the cost of acquisition as at the start of 2022. CRA will accept that value. Alternatively, if you have some way to prove the FMV as of Jan 1, 2022, that would be acceptable.

1 Like
3

Vehicle:

  • Purchased mid-2019 for $25,000
  • First used for business Jan 1, 2021 (business start date)

First-year CCA calc:
= $25,000 x 30% (CCA rate)
CCA = $7,500

Therefore his cost base would be $17,500.00 ($25K - $7,500) for January 1, 2022.

The only other thing I was thinking that may impact this calculation is the half-year rule because 2021 is the year it became available for use which would bring down the $7,500.00 CCA to $3,750.00.

Thoughts?

4

Best choice!

1 Like
5

That applies if it is a class 10 vehicle, but not if it is a class 10.1 vehicle. Also remember that you are just trying to calculate a reasonable FMV to use upon acquisition of the asset, so you could document it either way.

1 Like
6

Vehicle description:

  • Dodge Caravan seats 7 (including the driver)
  • Used by a tradesman to carry his tools and supplies
  • 100% used for business
  • Less than $30,000.00
  • Purchased in 2019 and used for business in 2021

I read the following (screenshots) CRA link:

Screenshot 2023-03-18 150859
Screenshot 2023-03-18 1508591738×1155 444 KB

vehicle
vehicle1830×1108 283 KB

My conclusion is this is a motor vehicle (based on the above highlights).

Please see the below link and screenshots regarding class 10/10.1 and half-year rule.

class
class1438×1210 272 KB

Based on the above highlights I believe this van will go in class 10 and have half-year rule applied.

Does anyone feel otherwise?

7

You are absolutely right.
Once you are over 90% business your in, just be able to justify that use

1 Like
8

I would question if the half year rule needs to apply since this is the second year the vehicle is on the road. But I guess if you bought a used van from a dealer, the half year rule would definitely apply.

1 Like