Reference no: EM132574432

For its taxation year ending December 31, 2019, Martin's Enterprises has determined that its Net Income For Tax Purposes before any deduction for CCA amounts to $53,000. The Company does not have any Division C deductions, so whatever amount is determined as Net Income For Tax Purposes will also be the amount of Taxable Income for the taxation year.

On January 1, 2019, the Company has the following UCC balances:

Class 1 (Building Acquired in 2004) $876,000

Class 8 220,000

Class 10 95,000

Class 10.1 (Porsche - Cost $110,000) 25,500

Class 10.1 (Cadillac - Cost $45,000) 25,500

During 2019, the cost of additions to Class 10 amounted to $122,000, while the proceeds from dispositions in this class totaled $87,000. The capital cost of the assets retired totaled $118,000. None of the individual assets sold had proceeds of disposition that exceeded their individual capital cost. There were still assets in Class 10 on December 31, 2019.

There were no acquisitions or dispositions in Class 1, 8 or 10.1 during 2019. The Company plans to sell the Porsche in January, 2020 and expects to receive about $75,000.

During the preceding three taxation years, the Company reported Taxable Income totalling $39,000 for the three years.

Required:

Question A. Calculate the maximum CCA that could be taken by Martin's Enterprises for the taxation year ending December 31, 2019. Your answer should include the maximum that can be deducted for each CCA class.

Question B. As Martin's Enterprises' tax advisor, indicate how much CCA you would advise the Company to take for the 2019 taxation year, and the specific classes from which it should be deducted. Provide a brief explanation of the reasons for your recommendation. In determining your solution, ignore the possibility that 2019 losses can be carried forward to subsequent taxation years.