Resources Ltd. had the following UCC and CEC balances on January 01, 2016:
Class 08 $ 200,000
Class 10 150,000
Class 12 45,000
Class 13 204,000
CEC 180,000
For the taxation year ending December 31, 2016, Resources Ltd. determined that its Net Income for Tax Purposes, before any deductions for CCA or CEC, amounted to $ 47,000. As the Company did not have any Division C deductions, Taxable Income, before any deductions for CCA or CEC, was also $ 47,000. Resources Ltd. had always deducted the maximum amount of CCA and CEC in previous years.
Other information relating to Resources Ltd.’s depreciable assets was as follows:
All of the Class 12 assets were acquired in 2015.
The leasehold improvements were made in 2014 at a cost of $240,000.
During 2016, the cost of additions to Class 10 amounted to $ 63,000, while the proceeds from dispositions in this class totaled $ 25,000. In no case did the proceeds of disposition exceed the capital cost of the assets retired, and, there were still assets in the class as of December 31, 2016.
There were no 2016 acquisitions or dispositions in Classes 08, 12, or 13. There were no eligible capital additions or dispositions during 2016.
Required:
A. Calculate the maximum CCA and CEC deductions that could be taken by Resources Ltd. for the taxation year ending December 31, 2016.
B. As Resources Ltd.’s tax advisor, indicate how much CCA and CEC you would advise them to take for the 2016 taxation year and the specific classes from which it should be deducted. Provide a brief explanation of the reason for your recommendation. In providing this advice, do not take into consideration the possibility that losses can be carried either back or forward.