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Trapping CCA claims on T776 - how do you stop auto-CCA?

Like many of us, I have a variety of clients with one or more rental properties. Generally I advise taking CCA if a long-term hold is planned, paying back the recapture on sale when funds are in hand.

Some clients though, insist that they NOT take CCA on buildings, despite having net revenue from them. Generally I’ve just marked the field with a carry-forward memo so I see it on review and can override the CCA to NIL. (Not, of course, for Class 8 items etc which are allowed to create a rental loss and which are generally depreciated to zip when the property is sold anyway.)

How do you handle it?

Where a client has signed off on NO CCA for the building, I have two classes of ‘Land’, one for the actual land plus one for the building with reference to class. That way I do not miss cancelling the CCA claim but can easily convert the ‘Land’ to the applicable class should the owner(s) decide for whatever reason that a CCA claim should be made after all.

Haven’t had anyone one yet make that request but I am prepared…

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Hi Helga:

You should be able to overwrite the amount on the T776 CCA summary and zero the CCA amount in field. I have a number of clients that don’t claim CCA on building, only on other depreciating assets associated with the rental property.

Greg.

On the 776CCA screen use the “Do you want to claim a different amount?” field

You should be able to overwrite the amount on the T776 CCA summary and zero the CCA amount in field. I have a number of clients that don’t claim CCA on building, only on other depreciating assets associated with the rental property.

I was aware of the override option but your method requires human intervention which could be missed. As CCA can only be changed when something else is changed, I’d rather have certainty and show it as Land.

As I have not had a client wanting to claim it after deciding not to, I’ll stick with a method that is in line with the software automatically NOT claiming CCA.

It’s trivial to overwrite the field or to stick a memo there that reminds me to look at every one of 6 or more CCA calculations to make sure that the building CCA remains at NIL. Otherwise, TaxCycle (obligingly, I might add) automatically calculates CCA and applies it, if possible. The point of the original post was to TRAP the automatic claim at NIL, never claiming it - permanently.

I was looking for a method to do that…ie I’d really prefer a tickbox that says “Never claim CCA on this item” and ignore it thereafter, rather than having to check each and every building’s T776-CCA sheet.

Helga’s method does that - it’s a bit of a funny workaround, but it’s effective. Once set as “Land”, no CCA will ever be automatically claimed.

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I have asked several times that they would roll over the selection I made in the previous years. To no avail.
Visual Tax has a tick box on the asset schedule if the class is used only for record keeping and not to claim CCA. That would be a good way of doing it.
@Cameron could you look into this?

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Most of my clients prefer to claim CCA but options are good. Tick box sounds like a good addition but maybe a warning about CCA being claimed on the asset this year where it wasn’t in a previous year might be easier for implementation.

@helga_spence
Interesting tip on classing the building as land to prevent an accidental miss on the CCA override.

I find it really easy to miss the override in the following situations:

  • reviewing the work of students, employees, and sub-contractors in long batches.
  • when working hyper long hours or during tax rush or with interruptions.
  • tax returns done in multiple stages due to missing documents. By my 4th+ review and micro change, I am less aware of the over-ride.

As much as I love depth, breadth, and many add-ons of TaxCycle I find the T1 module take me much longer to review the data entry forms than in ProFile or TaxPrep due to the layout and font. The biggest benefits to TaxCycle over the rest are on the workflow, letter, printing, reports, client manager, and support. Others love the DoxCycle module. For me, the T1 data entry and review is less than ideal. If possible I would prefer the font on the descriptions of the fields to be smaller or more compressed and the data entry amounts to be larger, expanded, or to pop more.

I would like to be able to lock the override so that it would take two keystrokes to unlock.

I would like a summary sheet of my overrides.

I would like to see a toggle or a setting at a client level to set the over-rides similar to the optimization form. This would be much preferred to the various preparer created workarounds and would scale better when hiring staff.

Items to include on such a page could include the following:

Suppress or Limit or Increase or Note
CCA - to suppress altogether such as rental building.
CCA - to pro-rate or limit based on kms or % use
CCA - to note a terminal loss or recapture amount

RRSP - limit claim to carryfwd
RRSP - increase to add slips with receipts but no AFR.

Eligible Dependent - shared custody and claim in alternating years.
Childcare expense - shared custody and claim in alternating years.
Spousal support claim - limit to actual payment rather than agreement when under Family Support Orders.

I am sure that if you had such a form that others would find additional uses for it.

“I would like a summary sheet of my overrides.”

Review tab, select drop-down box at the top “Review/Overrides”.

That would work for me too.

@SmallBizGuy
In the year of sale, particularly after holding the property for a long time, I would expect there to be a large capital gain - why add recapture in a year when the client will be taxed at a higher marginal rate? I understand your point re: having extra cash to pay those taxes in the year of sale, but most of my clients in this situation would rather pay a little bit of tax each year at a lower rate.

As such, I generally do not record the property on the T776 CCA schedule, and do not have to worry about overriding any CCA each year. If the client can give me the purchase agreement (or other supporting document), I retain a copy in my files so that I can properly fill out the S3 in the year of sale, but usually they don’t give me such documentation until the year of sale anyway.

Of course, none of the above applies to corporate clients, since we need complete balance sheet details there.

I do add it to the Asset list so I can add renos which the clients often consider repairs. This way, I have a current ACB when the client asks for an estimated tax bill for a property giving me the amount hoped for or offered on a potential sale.

In the event the owner(s) are all dead, you may find the personal representative has no idea where the documents you are asking for can be found. Do your homework. Get what you need while it’s easy to get. Don’t add unnecessary work to the load of the personal representative who is often grieving the decendent(s) as well.