# Car donation & self-employed



## balexis (Apr 4, 2009)

Hey all, 

I am self employed and currently own no car. A relative wants to give me (read: Donation) his old car. The approximate market value is 1000$. I would use the car for about 30% business and 70% personal use.

The question is: if I get the car for nothing, can I use the market value of the car and deduct a fair amortization every year in my tax report, or must I absolutly use the real transaction price, which would be 0$, preventing me to amortize the car at all? Any ref to CRA publications would be appreciated.

Thanks!


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## MoneyGal (Apr 24, 2009)

The answer is no; you cannot use the FMV of the vehicle and take deductions against that. You can only claim your actual capital costs, whatever they are, to create a capital cost allowance. This is true for all forms of capital property. 

Here is the link to the "main" CRA section on CCA:

http://www.cra-arc.gc.ca/tx/bsnss/tpcs/slprtnr/rprtng/cptl/menu-eng.html?=slnk

Here is a link to the specific definition of "capital cost:"

http://www.cra-arc.gc.ca/tx/bsnss/tpcs/slprtnr/rprtng/cptl/cptl-eng.html

(Note that only the first definition applies to you...the other definitions are related largely to real property.)


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## balexis (Apr 4, 2009)

Thanks for the quick reply MoneyGal.

How about this: get the car for 0$, use it 100% personnaly for 3 months, then start using it for business purposes. I'd be forced to evaluate its FMV then, right?

See this example from CRA's website:


> John bought a car in 2005 for $19,000. In 2009, he started using it for employment. By checking car dealerships and the newspapers, John determines its fair market value is $11,000. Therefore, he enters $11,000 in column 3.


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## MoneyGal (Apr 24, 2009)

You can see in the post you've linked to that in order to elect to convert a personal asset to business use, you are required to enter your "actual cost" of the asset and then base the FMV on that. 

I don't know how you snipped the quote from CRA like you did, but from the same page:

_When you start to use your property for business use, you are considered to have disposed of it. If the FMV of the property is greater than its cost, you may have a capital gain. _

So, if you did this, you would enter the actual cost of the car ($0), and then your estimate of the FMV (let's say $1000). Then you would report a capital gain of $1000 in that year's taxes and I guess you could start taking CCA against that $1000. It'd be 15% ($150) in year one against your taxable gain of $500.

However, in general, FMV is usually assumed - except for land and buildings - to be less than the actual cost. Cars are not an appreciating asset in general. 

You'd need to figure out what puts you ahead: claiming a capital gain of $1000 in Year 1 and 15% of $1000 in that first year, and then 30% of the declining balance until the car is completely depreciated; or just taking your current costs against the car, leaving CCA aside.


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## balexis (Apr 4, 2009)

Oh good catch for the disposition and the capital gain. This is quite logical in fact.

And for such small amounts though my guess is that I'd change 4 quarters for a dollar anyways.

Thanks again

PS to quote some text, type it in your message, select it and click the little bubble in the message editing toolbar (4th button from the left). It will insert [ QUOTE ] [ /QUOTE ] blocks around your text.


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## Berubeland (Sep 6, 2009)

Congrats on the free car !!!! 

I got a free car myself a few years back when my parents went to the dealer and he offered them $400 for it's trade in value. Then to add insult to injury he told my dad he heard the engine knocking (my dad is a master mechanic). So I got a van.


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## balexis (Apr 4, 2009)

Thanks Berubeland! Plus its my first car ever so its kind of exciting


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## Farly (Aug 18, 2009)

Using the capital gain senario there would be actual capital gain. The car woud be personal use property. Personal use property has a deemed $1000 ACB (cost) and proceeds.


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## the-royal-mail (Dec 11, 2009)

On a $1000 car I just don't see the point. It's a beater, one step away from the junk yard. You'll be messing around with paperwork more than you'll ever gain. These sorts of tax arrangements make more sense for cars valued as in the examples above, not on $1000 beaters.

P.S. I actually prefer the way MG quotes stuff in italics. I am sure she is aware of how to do it in the forum but she has chosen to use italics instead.


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## balexis (Apr 4, 2009)

Indeed for a 1000$ car we're talking peanuts here.

PS I only pointed out the quotation thingy because MG said:


> I don't know how you snipped the quote from


. Of course quotation style is a matter of personal taste.


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