Does the amount determined under Reg. 1100(0.1)(c) - the income of an eligible person or partnership (EPOP) earned from a business or property (computed without regard to s. 20(1)(a)) in which the relevant designated immediate expensing property (DIEP) is used for the EPOP’s taxation year - include any relevant recapture of CCA or terminal loss? CRA responded:
Since a taxpayer’s recapture and terminal loss are included or deducted from income, respectively, under subsections 13(1) and 20(16) … and are not included in income under paragraph 20(1)(a) … these amounts would be reflected in an EPOP’s income amount for purposes of paragraph 1100(0.1)(c) of the Regulations where they relate to the same source of income that is a business or property in which the relevant DIEP is used for the EPOP’s taxation year.
We further note that where a taxpayer has either a recapture of CCA or a terminal loss in respect of a particular class in a taxation year, generally no CCA would be deducted in respect of that class in the year.
Can immediate expensing CCA be deducted prior to regular CCA and, if so, can regular CCA then be used to create a loss from self-employed business income following the immediate expensing CCA claim? After noting that Reg. 1100(0.1)(c) prevents an EPOP that is an individual or partnership from using the immediate expensing incentive to create or increase a loss, CRA stated:
However, following their immediate expensing claim and subject to various rules which may apply to limit a taxpayer’s CCA claim for a taxation year, such as those in [Regs. 1100(11) and (15)] an individual or partner may use regular CCA on any remaining UCC balances to create or increase a loss.
CRA also indicated that, given that CCA is claimed in computing income at the partnership level, the immediate expensing income limit under Reg. 1100(0.1)(c) is also determined at the partnership level.
CRA further indicated that, given that a taxpayer’s Farmers Fuel Charge Tax Credit under s. 127.42 is included in the taxpayer’s business income under s. 12(1)(x) in the year of the related farming activity then, provided that the credit and DIEP relate to the same business, the credit (included in an EPOP’s business income) would be included in the amount of income used for purposes of determining the immediate expensing limit under Reg. 1100(0.1)(c).