Sole proprietor used personal vehicle for business and claimed CCA and expenses at prorated amount yearly.
2022 - taxpayer started using another vehicle for business and old vehicle no longer was used and given to his high school son.
Old vehicle - UCC start of 2022 just over $2k.
Two questions:
As with any form… open the form for old vehicle … in the Home ribbon… half way across you should see Form icon // click on it and select new
There are a few different ways to accomplish cloning/ adding form in Taxcycle… this is easiest more me to explain.
On the vehicle now deemed personal:
Was Taxpayer registered for HST and did they take an HST credit on the vehicle? If so, he ( as the family) or his son… as non registered individual will need to buy back the Vehicle from the company and submit HST on sale or deemed sale as the case may be.
You did not state if registration changed to son or he is just letting him use the vehicle.
If no HST implications, I would move it off at FMV or depreciated value… depending on what that actually is.
I understand many small business owners do not think twice about the tax implications of moving vehicles around but CRA is back to audits… cross your T’s and dot your “i’s”
Rachel Parlee
Created a new form for the new vehicle.
Owner not HST registered when old vehicle started to be used for business in 2018 - no HST claimed.
2020 the owner registered for HST. There was a $40ish ITC in 2020 & $20ish (nominal amounts) in 2021 claimed on the CCA as per below:
From the article below - I copied and pasted in italics the info and provided a screenshot.
Partnerships and Individuals
Excise Tax Act s. 202(2), 202(4)
Otherwise, the ITC is based on the capital cost allowance (CCA) claim for the vehicle at the end of each tax year, except in a year in which the use of the passenger vehicle or aircraft results in a taxable benefit to an employee of the business. In this case, no ITC can be claimed in the year. Once the CCA has been calculated for the vehicle, calculate your ITC as shown in the calculations below.
Ownership changed middle of 2022 (vehicle not used for business at all in 2022).
I don’t see any HST implications, do you?
Opening UCC in 2022 was just over $2k (depreciated value)
Vehicle was purchased for $9k in 2016 and then given to the son mid 2022 (6 years later).
To move it off at depreciated value ($2k) sounds reasonable (the value dropped about $1k/YR approximately).
Thoughts?
Ask, “What proceeds did the corporation receive on the sale of this asset?” That should help you figure out how to record the disposal of the corporate asset.
Be aware of attribution - analyze whether it could be considered a sale from the corporation to the shareholder (after which the shareholder gave it to his son).
Depending on that analysis and the the amount of proceeds vs FMV, you may also want to advise your client re: the possibility of tax due to a shareholder benefit re: ITA 15(1).
Hope that helps!
This tax scenario is in regards to a sole proprietorship. The sole proprietor gave the vehicle to their child. Does that change your reply?
Sorry, just re-read the original post. If it was a personally owned vehicle, you have to figure out what portion of the proceeds can be attributed to the business. Of course, if the the proceeds were zero, I guess that’s an easy calculation.
However, given the non-arms length relationship, CRA could question the “sale price”, and deem that it should have occurred at FMV (because “for profit” businesses don’t give away assets that have value).
Obviously you need to clear out the UCC, but that doesn’t mean you should set the proceeds = UCC unless UCC is close to FMV.
Thank you!!!
