Line 101 - Is the corporation electing under Regulation 1101(5q)?

Line 101 - Is the corporation electing under Regulation 1101(5q)?

To answer this question, tick the yes or no box.

This election allows you to include certain property usually included in classes 8 and 43 in a separate class. You have to have acquired each property at a capital cost of at least $1,000. The types of properties that qualify for this election include manufacturing and processing property, photocopiers, and electronic communications equipment, such as facsimile transmission devices or telephone equipment.

You can elect to classify a property in a separate class or several properties in one or more than one separate class.

This election can allow you to claim a terminal loss, which is any remaining undepreciated capital cost at the time of disposition of the properties in this class. For more information on terminal losses, see "Column 6 - Undepreciated capital cost."

CCA rates and classes

Electric energy storage property - Stand-alone electrical energy storage property not associated with a class 43.1 or class 43.2 generation source is generally included in class 8 and is eligible for a 20% declining balance capital cost allowance (CCA) rate. Under proposed changes, for property acquired for use after March 21, 2016, that has not been used or acquired for use before March 22, 2016:

• if the storage property is part of an electricity generation system that is eligible for class 43.1 (that is, a mid-efficiency cogeneration system), it will be included in class 43.1. This class allows for a 30% declining balance CCA rate;

• if the storage property is part of an electricity generation system that is eligible for class 43.2 (for example, an eligible renewable, waste-fueled or high-efficiency cogeneration system), it will be included in class 43.2. This class allows for a 50% declining balance CCA rate;

• if the storage property is a stand-alone electrical storage system and the round trip efficiency is greater than 50%, it will be included in class 43.1. This class allows for a 30% declining balance CCA rate. (Round trip efficiency measures the extent to which energy is maintained in the process of converting electricity into another form of energy and then back into electricity.);

• a fuel cell that uses hydrogen generated from ancillary electrolysis equipment is eligible for inclusion in class 43.2 only if the electrolysis equipment uses electricity generated by certain equipment. This list of equipment will be expanded to include geothermal equipment and electricity generated by using the kinetic energy of flowing water or wave or tidal energy.

Electric vehicle charging stations - Electric vehicle charging stations (EVCSs) are generally included in class 8 and are eligible for a 20% declining balance CCA rate.

Under proposed changes, for property acquired for use after March 21, 2016, that has not been used or acquired for use before March 22, 2016:

• EVCSs set up to supply more than 10 kilowatts of continuous power and certain electrical equipment used primarily in connection with such an EVCS will be eligible for inclusion in class 43.1. This class allows for a 30% declining balance CCA rate;

• EVCSs set up to supply at least 90 kilowatts of continuous power and certain electrical equipment used primarily in connection with such an EVCS will be eligible for inclusion in class 43.2. This class allows for a 50% declining balance CCA rate.

Completing Schedule 8

This section explains how to complete each column of Schedule 8. Use a separate line for each class of property.

Reference
S3-F4-C1, General Discussion of Capital Cost Allowance

Column 1 - Class number

Identify each class of property with the assigned class number.

Generally, you have to group all depreciable property of the same class together. Then, calculate CCA on the undepreciated capital cost of all the property in that class.

However, sometimes you have to maintain a separate record for each property in the same class. For example, list on separate lines property that you would usually group in the same class but use to earn income from different sources. Also, list on a separate line each class 10.1 passenger vehicle and property you elected to identify in a separate class under Regulation 1101(5q).

Note
If a class number has not been provided in Schedule II of the Income Tax Regulations for a particular class of property, use the subsection provided in Regulation 1101.

Reference
Regulation 1101

Column 2 - Undepreciated capital cost at the beginning of the year

Enter the amount of the undepreciated capital cost at the end of the previous tax year. This is the amount from column 13 of your last tax year's Schedule 8.

Column 3 - Cost of acquisitions during the year

For each class, enter the total cost of depreciable property you acquired in the tax year. Depreciable property is considered acquired when it becomes available for use. See page 39 for more information on the available-for-use rule.

The cost of acquisitions generally means the full cost of acquiring the property, including legal, accounting, engineering, and other fees. Land is not a depreciable property, and is therefore not eligible for CCA.

List any acquisitions that are not subject to the 50% rule, separately. See Regulations 1100(2) and (2.2) for more information about these types of acquisitions.

Do not enter section 85 transfers in this column.

References
Regulations 1100(2) and (2.2)

Column 4 - Adjustments and transfers

In some cases, you will have to adjust the capital cost of a property. In column 4, enter the amounts that will either reduce or increase the capital cost.

Reduce the capital cost of a property by the following amounts:

• goods and services tax/harmonized sales tax (GST/HST) input tax credit claimed or entitled to be claimed, or rebate received or entitled to be received in the year;

• federal investment tax credits (ITCs), other than SR&ED ITCs, used to reduce taxes payable or claimed as a refund in the previous tax year;

• reduction of capital cost after the application of section 80;

• provincial or territorial ITCs received or entitled to be received in the current year; and

• government assistance received or entitled to be received in the year.

Add to the capital cost of the property:

• repayment of GST/HST input tax credit previously claimed; and

• government assistance repaid in the year that previously reduced the capital cost.

Also include in column 4 depreciable property transferred upon amalgamation or upon the wind up of a subsidiary, and depreciable property transferred under section 85.

Show the amounts that reduce the capital cost in brackets.

Do not include them as income.

Note
A corporation that receives an amount of non-government assistance to buy depreciable property has the option of either reducing the capital cost of the property by this amount, or including it in its income.

References
Subsections 13(7.1), 13(7.4), and 13(21)
Paragraph 12(1)(x)

Column 5 - Proceeds of dispositions during the year

For each class, you usually enter the total proceeds of disposition received or are entitled to be received for property disposed of during the year. However, if you disposed of the property for more than its capital cost, enter the capital cost, not the actual proceeds of disposition.

A capital gain results when you dispose of a depreciable property for more than its capital cost. However, losses on depreciable property do not result in capital losses. They may result in terminal losses. See column 6 for more details about terminal losses.

Column 6 - Undepreciated capital cost

To calculate the amount you have to enter in column 6:

• add the amounts in columns 2 and 3;

• either subtract or add the amount in column 4 (subtract if it is a negative amount, or add if it is a positive amount); and

• subtract the amount in column 5.

You cannot claim CCA when the amount in column 6 is:

• positive, and no property is left in that class at the end of the tax year (a terminal loss); or

• negative (a recapture of CCA).

Terminal loss

A terminal loss results when you dispose of all the property in a particular class and there is an amount of undepreciated capital cost left in column 6. You have to deduct the terminal loss from income. For details, see example 1 under the heading "Schedule 8 examples" that follows.

Recapture of CCA

If the amount in column 6 is negative, you have a recapture of CCA. A recapture of CCA occurs when the proceeds of disposition in column 5 are more than the total of columns 2 and 3, plus or minus the amount in column 4 of that class.

You have to add the recapture to income. For details, see example 2 under the heading "Schedule 8 examples" that follows.

The recapture and terminal loss rules do not apply to passenger vehicles in Class 10.1.

Enter the recapture or terminal loss from column 6 in column 10 or 11. In this case, do not complete the rest of the columns for that line.

Column 7 - 50% rule

Generally, property acquired during the tax year is only eligible for 50% of the normal maximum CCA for the year.

You can claim full CCA for that property in the next tax year.

To apply the 50% rule, the undepreciated capital cost of the property has to be adjusted. This adjustment is equal to one-half of the net amount of additions to the class (the net cost of acquisitions minus the proceeds of dispositions).

Enter this amount in column 7. For details, see example 3 under the heading "Schedule 8 examples" that follows.

When applying the 50% rule, the net amount of additions must take into account some adjustments in column 4 (plus or minus). However, do not reduce the net amount of additions by the ITC claimed in the previous tax year and included in column 4.

Certain properties acquired through non-arm's-length transfers or butterfly transfers (which occur in the course of certain reorganizations) are exempt from the 50% rule.

Reference
Regulation 1100(2)

Column 8 - Reduced undepreciated capital cost

In this column, enter the amount you get when you subtract the amount in column 7 from the amount in column 6.

Column 9 - CCA rate

Enter the prescribed rate that applies, as provided for under Part XI of the Regulations. If a specific rate has not been provided for a particular class of property, enter N/A in this column.

Enter a rate only if you are using the declining balance method. In this method, the CCA is calculated by multiplying a constant rate by the diminishing balance every year.

Note
Some asset classes use the straight-line method to calculate the CCA. In this method, the CCA is calculated by dividing the original amount by the number of years that corresponds to the life expectancy of the property. Therefore, the deducted amount remains the same from one year to the other (except the first and last year, if the half-year rule applies) and you do not have to enter a rate.

Example

Declining balance method - The capital cost of an asset is $780,000. The rate for the class is 10% with a half-year rule.

First year:
10% × $780,000 = $78,000
$78,000 ÷ 2 = $39,000 CCA (half-year rule)

Second year:
$780,000 - $39,000 = $741,000 (undepreciated capital cost)
$741,000 × 10% = $74,100 CCA

Third year:
$741,000 - $74,100 = $666,900 (undepreciated capital cost)
$666,900 × 10% = $66,690 CCA

And so on for the following years.

Straight-line method - The capital cost of an asset is $780,000, its life expectancy is 10 years and the half-year rule does not apply. Therefore, the capital cost allowance will be $78,000 per year ($780,000 ÷ 10).

Class 13 (property that is a leasehold interest) uses the straight-line method with the half-year rule. The amount that has to be entered in column 7 is half of the result you obtain when dividing the amount of the acquisition by the amortization period. The full amount of this result can be claimed on the second year and so on, until the last year of the amortization period. The last year of the amortization period, you can claim up to one and a half amount of this result.

For more information on the special rules that apply to class 13, see Interpretation Bulletin IT-464, Capital Cost Allowance - Leasehold Interests. For more information on the half-year rule, see Income Tax Folio S3-F4-C1, General Discussion of Capital Cost Allowance.

Example

A leasehold interest of 10 years starts on January 1, 2015, and ends on December 31, 2024. A leasehold improvement of $9,000 is made in 2016. The amortization period is 9 years, that is the number of years remaining in the lease.

First year (2016):
$9,000 ÷ 9= $1,000
$1,000 ÷ 2= $500 CCA (half-year rule)

Second year and following (2017 to 2023):
$1,000 CCA per year

Last year of amortization period (2024): $1,000 × 1 1/2= $1,500 CCA.

If a disposition occurs during the amortization period, the
terminal loss is claimed in the year it occurs.

Column 10 - Recapture of capital cost allowance

Enter the amount of recapture from column 6, if applicable.

Be sure you include the recapture as income. Enter the total of amounts in column 10 on line 107 of Schedule 1.

Column 11 - Terminal loss

Enter the terminal loss from column 6, if applicable. Deduct the terminal loss from income. Enter the total of amounts in column 11 on line 404 of Schedule 1.

Column 12 - Capital cost allowance

To claim the maximum CCA for each class, multiply the amount in column 8 by the rate in column 9, and enter the result in column 12. You do not have to claim the maximum allowable CCA. You can claim any amount up to the maximum.

If the tax year is less than 365 days, prorate the CCA claim for all property except for those classes of property that Regulation 1100(3) excludes. The exceptions in Regulation 1100(3) include:

• class 14 assets;

• class 15 assets;

• timber limits and cutting rights;

• industrial mineral mines;

• certified productions;

• Canadian film or video productions; and

• certain mining equipment in classes 28 and 41.

To determine the maximum CCA claim, multiply the maximum CCA for a complete year by the number of days in the tax year divided by 365.

References
Regulation 1100(3)
IT-147, Capital Cost Allowance - Accelerated Write-off of Manufacturing and
Processing Machinery and Equipment

The total of all amounts in column 12 is the CCA claim for the tax year. Deduct this amount on line 403 of Schedule 1.

Notes
If you want to change the amount of CCA claimed in a tax year, send a written request within 90 days of the date on the notice of assessment or notice of reassessment. Only under certain circumstances can we make adjustments after the 90-day period has expired.

For more information, see Information Circular IC84-1, Revision of Capital Cost Allowance Claims and Other Permissive Deductions.

Column 13 - Undepreciated capital cost at the end of the year

Subtract the amount in column 12 from the amount in column 6 and enter the difference.

When there is a recapture of CCA or a terminal loss for a particular class in the year, the undepreciated capital cost at the end of the year is always nil.

Schedule 8 examples

Example 1: Terminal loss

An import-export business decided to sell its warehouse, because it is better to lease instead. The business received $60,000 for the warehouse. At the end of the 2016 tax year, the business had no more assets in class 3.

The business's Schedule 8 for its 2016 tax year looks like this:

The amount in column 11 is a terminal loss.

The import-export business deducts the $5,000 terminal loss from its income (line 404 of Schedule 1).

Example 2: Recapture of CCA

A clothing company bought a sewing machine in 2014 for $15,000. Now, because of the overwhelming success the company has had in the retail end of the business, it has decided to concentrate solely on retailing. As a result, the company sold its sewing machine in 2016 for $18,000 (but the proceeds of disposition in column 5 cannot be more than $15,000, the capital cost). At the beginning of 2016, the undepreciated capital cost of the sewing machine was $10,800.

The company's Schedule 8 for its 2016 tax year looks like this:

The amount in column 10 is the recapture of CCA.

The clothing company includes the $4,200 recapture in its income (line 107 of Schedule 1). The capital gain is $18,000 minus $15,000, which equals $3,000.

Example 3: 50% rule

In the 2016 tax year, a bookstore bought a photocopier to help keep up with the paperwork, and started using it right away.

The copier cost $10,000. The bookstore has to apply the 50% rule when it calculates the amount of CCA it can deduct for 2016.

The bookstore's Schedule 8 for its 2016 tax year looks like this:

List of CCA rates and classes

The following chart is a partial list and description of the most common capital cost allowance (CCA) classes. You will find a complete list in Schedule II of the Income Tax Regulations.