# CCA recapture question



## gerogesin (Jan 3, 2014)

Hello all
I'd like to get some clarification as to how recapture is calculated based on a rental property. 
Lets say I buy a washer\dryer for $1500 which is a class 8. I then depreciate it by 20% every year (except the first year due to the one-half rule) until the item is zero. When I go to sell and make more than what I paid for the home, I will have to pay the capital gains tax + recapture. But is the recapture amount $1500? 

I'm trying to figure out if it's even worth claiming CCA. 

Thanks in advance.


----------



## Davis (Nov 11, 2014)

Let's say you claim CCA of $1000 between the time you buy it and when you sell it. The "Adjusted Cost Base" is now $1500 - 1000 = $500. If you sell it for $650, you will have a capital gain of $650 - 500 = $150 (the "recapture"), not $1500.


----------



## gerogesin (Jan 3, 2014)

Davis said:


> Let's say you claim CCA of $1000 between the time you buy it and when you sell it. The "Adjusted Cost Base" is now $1500 - 1000 = $500. If you sell it for $650, you will have a capital gain of $650 - 500 = $150 (the "recapture"), not $1500.


Oh I think you misunderstood what I meant by selling. I meant if I sold the home with the washer and dryer included. 

Here are two scenarios:
a) my w/d depreciates to zero by the time I sell the house, what do I owe during the recapture? 

b) my w/d depreciates to $500 by the time I sell the house, what do I owe during the recapture? 

Keeping in mine the home sell for more than what I paid for both scenarios.

Thanks


----------



## Davis (Nov 11, 2014)

You would add the depreciated cost of the w/d to the cost of the house to determine your capital gain on the house.

For example: buy the house for $300,000 and w/d for $1500. Depreciate the w/d to $500 (this is its "Adjusted Cost Base" (ACB)). Sell the house for $400,000. Your Adjusted Cost Base (ACB) for the house _with the w/d included_ is $300,500. 

Your capital gain is $99,500 (setting aside any other costs that affect your ACB like transaction cost, CCA on the house if you claimed it, other improvements....)

Because CCA is calculated on a declining balance basis, you can't really depreciate to zero. 

"Recapture" refers to the capital gain that you earn by selling something for more than its ACB. It is not recapture of the actual depreciation you experience on something. So if you sell something for a price equal to its ACB, you have no recapture/capital gain.


----------



## Numbersman61 (Jan 26, 2015)

When rental property is purchased or sold the cost and net proceeds must be allocated among the various components:
Land
Building
Equipment or appliances ( class 8)
The allocation must be reasonable - in some instances the allocation will be part of the negotiations between buyer and seller if both parties are treating it as an investment.
Upon the sale of the property and assuming you claimed CCA on the building and appliances, you may have recaptured CCA if the proceeds exceed the cost less CCA claimed. This amount (recaptured CCA) is included in income - 100%. Proceeds in excess of the cost are considered a capital gain - 50% taxable.


----------

