Lou Silva Has Owned and Operated the Wellness Store for Fifteen

question 8

Essay

Lou Silva has owned and operated The Wellness Store for fifteen years.The company's year-end is December 31st.
The following chart lists the company's assets owned prior to 2020 and their UCC balances as of January 1, 2020.
$\begin{array}{|l|r|}\hline{\text { Asset }} & {\text { UCC Balance }} \\\hline \text { Store (building purchased in 2005) } & \$ 100,000 \\\hline \text { Delivery van (Class 10) } & 15,000 \\\hline \text { Furniture and office equipment (Class 8) } & 30,000 \\\hline \text { Photocopier purchased in 2018(Separate Class 8) } & 2,000 \\\hline \text { Patent (purchased in 2017) } & 10,000 \\\hline\end{array}$ The following transactions took place in 2020:
a.Lou purchased $2,000 worth of small tools (each costing under $500).
b.The delivery van was sold for $12,000.The original cost was $20,000.A second-hand van was purchased in the year for $16,000.
c.$15,000 was paid for an air conditioning system in the building, which was added to the cost of the standard Class 1 pool.
d.Lou sold the photocopier for $1,500 in the year, and will replace it in January, 2021 with a second-hand model valued at $1,700.
e.Lou amortizes the patent in Class 44.
f.The business acquired a franchise on March 1^st of 2020 for $55,000.The franchise has a limited legal life of 20 years.(Ignore leap year effects.)
Required:
A) Calculate the following:
1) the total CCA that Lou will be able to claim in 2020
2) any recapture and/or terminal loss that occurred during the year.
B)What would the tax effect have been for the original photocopier if Lou had purchased the new photocopier during 2020?

• A) Calculate the following:
• 1) the total CCA that Lou will be able to claim in 2020
• 2) any recapture and/or terminal loss that occurred during the year.
• B)What would the tax effect have been for the original photocopier if Lou had purchased the new photocopier during 2020?

---

Definitions:

Federal Income Tax

A tax levied by the federal government on the annual earnings of individuals, corporations, trusts, and other legal entities.

Social Security Tax

A tax levied on both employers and employees to fund the Social Security program, which provides retirement, disability, and survivorship benefits.

Gross Salary

The total amount of an employee's earnings before any deductions are made, such as taxes and social security contributions.

Insurance

A financial product that provides protection against financial loss, offering compensation in the case of specific events such as accident, illness, or damage to property.