For tax purposes, the deduction for using a long-lived asset for business purposes is calculated...
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For tax purposes, the deduction for using a long-lived asset for business purposes is calculated through the capital cost allowance (CCA) system. Under this system, assets are assigned to a particular class and the amount of CCA for the year is limited to a specified percentage of the Undepreciated Capital Cost (UCC) of the class.
What does it mean if the particular UCC class has a positive balance, but there are no assets remaining in the class? What are the tax implications of this situation? Be sure to explain both the meaning of this situation and the impact on taxable income.
What does it mean if the balance of the particular UCC class is negative? What are the tax implications of this situation? Be sure to explain both the meaning of this situation and the impact on taxable income.
What are the implications of the above two situations for decisions regarding the timing of the acquisition of fixed assets? Explain.
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