Gain on Disposal of Tools
Income Tax Act s. 56(1)(k)
When tools are disposed of for which an employee
tools deduction was previously claimed, any gain from the
disposal must be included in income on line 130 of the tax return.
The gain on sale of these tools is calculated as the proceeds from sale,
less the adjusted cost of the tool. The adjusted cost is the original
cost reduced by any tool deductions claimed.
The Québec calculation is similar. Québec has a fillable form, TP-75.2-V,
which you can complete, and it will calculate the appropriate amount to
include in income.
When the tools deductions are claimed, keep the records that will allow the
calculation of the adjusted cost of each tool purchased.
How is the adjusted cost calculated?
Our Employee Tools
Deduction Calculator will do this calculation for you.
The adjusted cost of an individual tool is calculated as
D - (D x [E / A])
where
D = the original cost of the eligible tool.
E = the total of the tradesperson's tools and apprentice
mechanic tools deductions that you claimed in the year that the tool was
purchased (assume the entire apprentice mechanic tools deduction was claimed
in the year, even if a portion was carried forward).
A = the total cost of eligible tools that you purchased in
that year.
