Explain the Rationale Behind the Half-Year Rule

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The Answer is Investments in capital assets are undertaken throughout the year.If an asset is acquired towards the end of the year,in the absence of the half-year rule the company will receive a tax benefit for the entire year,regardless of when the asset was purchased.The government introduced the half-year rule to prevent this.As a result,the tax benefit of any acquisition is limited to half the amount in the first year,regardless of the date of purchase.Assuming all purchases occur half-way through the year reduces the cost of administering the capital cost allowance system.

Explain the Rationale Behind the Half-Year Rule

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