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What do the terms recapture of Capital Cost Allowance (CCA) and Terminal Loss mean? - Madan CA

What do the terms recapture of Capital Cost Allowance (CCA) and Terminal Loss mean?

Allan Madan, CA
 Nov 30, 2012
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Question:

My company sold capital assets (including a building, furniture and equipment). I see the terms “Recapture” and “Terminal Loss” on my corporate tax return, what do these mean?

Answer:

When you purchase capital assets (e.g. vehicles, buildings, furniture, computers, equipment), the Canada Revenue Agency (CRA) applies specific depreciation (CCA) rates. The rates are a medium to represent the declining value of the asset each year.

When an asset is disposed of during the year, its selling price is compared to the undepreciated value of the asset. If the selling price is lower than the undepreciated value, the difference is called a terminal loss. The terminal loss is a tax deduction on the corporate tax return.

If the selling price exceeds the undepreciated value, the excess is called recapture and is included in income.

Disclaimer

The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.

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