Calculate the tax under capital cost allowance, Taxation

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Your firm  purchased a line of computer equipment for $1.5M  four  years ago.  It is assigned a CCA rate of 20% and the firm has a tax rate of 35%.  At the end of this year (year 4  for the machine) you decide to sell the computer equipment and as a result you will terminate the asset pool. Calculate the tax implications under the following scenarios and classify each as a terminal loss, CCA recapture, or neither.

a.  You sell the equipment for $691,200.

b.  You sell the equipment for $2,000,000.

c.  You sell the equipment $1,000,000.

d.  You sell the equipment for $500,000.

e.  The equipment is worthless.


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