Complicated Income Tax Act

Complicated Income Tax Act

The Income Tax Act(ITA), as mentioned in previous posts, requires adding back amortization to calculate Net Income for tax purposes. After that, the capital assets are put into a special pool, and a unique form of amortization deductions called Capital Cost Allowance (CCA) is used to calculate amortization for tax purposes.
Then it gets complicated.
If one has a land and building, and one sells the two, it may lead to little capital gains on one and a great deal of (taxable!) capital gains on the other. Section 44(6) and 13(4) of the ITA help to spread proceeds from one to another, minimizing immediate capital gains but affecting CCA. This tactic does mean a greater potential for capital gains in the future, and reduces the amortization deductible in the future. Overall, it is beneficial as it reduces immediate high capital gains taxes right away. Cash savings now is better than savings in the future.
Due to the complications of the 6cm-thick ITA, professional advice is recommended.