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Eligible Capital Property

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Business -> Eligible Capital Property
Income Tax Act s. 14(5), 20(1)(b), 54, 248(1)

Eligible Capital Property, Eligible Capital Expenditures and Cumulative Eligible Capital Deduction

Some examples of eligible capital property are goodwill, trademarks, and some patents, which are considered intangible assets.  The costs incurred to buy these assets are called eligible capital expenditures.  Costs incurred for incorporation, reorganization or amalgamation also qualify as eligible capital expenditures.

Eligible capital expenditures cannot be deducted in full, and are not eligible for capital cost allowance (CCA).  They may qualify for a partial deduction called a cumulative eligible capital deduction.

When eligible capital property is purchased, in most cases 75% of the cost is recorded in a "cumulative eligible capital (CEC) account".    This is an account which tracks, for tax purposes, your eligible capital property acquisitions and dispositions.  7% of the balance of this account can be deducted from income each year.

Information on Canada Revenue Agency (CRA) website:

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Income Tax Interpretation Bulletin IT143R3 - Meaning of Eligible Capital Expenditure

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Eligible Capital Expenditures - Sole Proprietors and Partnerships

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T4002 Business and Professional Income Guide - See Chapter 5 Eligible Capital Expenditures - calculation of eligible capital deduction for self-employed sole proprietors or partnerships.

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T4012 T2 Corporation Income Tax Guide - Look for cumulative eligible capital deduction

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T2SCH10 - Cumulative Eligible Capital Deduction

Revised: February 16, 2012

 

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