As of January 1, 2017, you can no longer claim the allowance on eligible capital expenditures. Property that formerly would have been eligible capital property is now considered depreciable property under the capital cost allowance rate of Class 14.1.
You may buy property that does not physically exist but gives you a lasting economic benefit. The CRA calls this kind of property eligible capital property.
Some examples are goodwill, franchises, concessions, or licences for an unlimited period.
The CRA considers franchises, concessions, or licences with a limited period to be depreciable properties, not eligible capital properties. For details about depreciable properties, go to Claiming capital cost allowance (CCA).
Under certain conditions, you can elect to treat the disposition of an eligible capital property (other than goodwill) as a regular capital gain. For example, properties such as a franchise, concession, or licence that has an unlimited life may qualify for this election.
By electing, you deem to remove the property from your cumulative eligible capital (CEC) account for proceeds equal to its original cost.
You can then declare a capital gain equal to your actual proceeds of disposition minus the cost of acquisition.
Report the details on the "Real estate, depreciable property and other properties" line of Schedule 3, Capital Gains (or Losses).
This election will benefit you if you have unused capital losses to apply against the capital gain.
The election is available if you meet the following conditions:
File your election by attaching a note to your paper income tax return or send it to your tax services office or tax centre. Be sure to include your name, address and social insurance number so that CRA can correctly identify your election.
If you sell an eligible capital property and replace it with another one for the same or similar use, you can choose to postpone all or part of any gain on the sale. You can postpone or defer adding a capital gain or recapture of capital cost allowance (CCA) to income.
You might sell a business property and replace it with a similar one, or your property might be stolen, destroyed, or expropriated and you replace it with a similar one. You can defer tax on the sale proceeds which you reinvest in replacement property within a reasonable period of time. To defer reporting the capital gain or recapture of CCA , you must acquire and you, or a person related to you, must use the new property for the same or similar purpose as the one that you are replacing.
This happens if you acquire a replacement eligible capital property within a certain period of time. To do this, you have to replace the property no later than one year after the end of the tax year in which you sell the original property.
You can also defer a capital gain or recapture of CCA when you transfer property to a corporation or a partnership.
You cannot fully deduct an eligible capital expenditure because the expenditure is considered to be capital in nature and provides a lasting economic benefit. However, you can deduct part of its cost each year. The CRA calls the amount you can deduct your annual allowance.
This is the bookkeeping record you establish to determine your annual allowance. You also use your CEC account to keep track of the property you buy and sell. The CRA calls the property in your CEC account your eligible capital property. You base your annual allowance on the balance in your CEC account at the end of your fiscal period.
Keep a separate account for each business, but include all eligible capital property for the one business in the same CEC account.
Fill in the following chart to calculate your annual allowance and the balance in your cumulative eligible capital (CEC) account at the end of your fiscal period.
Balance in the account at the start of your fiscal period
$ Blank space for dollar value Line 1Eligible capital expenditures you made or incurred in your fiscal period
$ Blank space for dollar value $ Blank space for dollar value Line 2Line 1 plus line 2
$ Blank space for dollar value Line 3All the amounts you received or are entitled to receive from the sale of eligible capital property in your fiscal period
$ Blank space for dollar value Line 4All the amounts that became receivable in your fiscal period from the sale of eligible capital properties before June 18, 1987
$ Blank space for dollar value Line 5Line 4 plus line 5