Do I claim CCA on an asset that I buy and sell in the same year?

Hey,

I'm in Canada under the ITA, and I'm trying to figure out if I buy an asset and sell it in the same calendar year (fiscal year is calendar year), then do I still do a depreciation calculation, even though I have had it less than a year?

Thanks!

When you buy an asset its cost is added to the pool of assets of the business.

The half-year rule applies and the depreciation associated with the asset is limited to 1/2 of its CCA rate for the fiscal year in which it was purchased.

If the asset is in turn sold in the same fiscal year the asset pool associated with the asset class is reduced by the net sale proceeds.

If you sell the asset for a price greater than the (cost - allowed CCA) you could create a capital gain; for example
you buy a computer for $1,000
CCA rate 55% or $550
1/2 year CCA = $275
and you sell it for $900

You have the option of taking any or all of the CCA available.
If you were to take it all you would claim CCA of $275 and that would create a capital gain on the sale of the computer of $900 - ($1000 - $275) = $175
If you were to take $100 CCA there would be no capital gain on the disposition of te computer or
If you were to take no CCA there would be a capital loss of $100 on the sale of the computer.

Depending on your tax situation and available tax pools you would optimize the amount of CCA you take to minimize taxes paid.

If that asset is the only asset in the CCA class, you dont claim any CCA because u dont own the asset at year end (no undepreciated capital cost at yr end to claim CCA).

In your case, the asset is likely to be sold at a lesser amount than the purchase cost, and this results in a "terminal loss" which is deductible against your business income.

No, even under normal circumstances, during the first year of ownership, you only claim 50% of the normal allowance.

But in this case, if you buy and sell within a single year, you don't claim any allowance, because you've already settled the loss for the year (if any). It would be the difference between what you paid and what you sold it for.