[porpoise1877]

I own a rental property and I had the furnace replaced in it this year. Is the cost of the labour for installing the furnace included in the Capital Cost Allowance?

[JohnNP]

porpoise1877, on Feb 8 2010, 08:57 AM, said:

I own a rental property and I had the furnace replaced in it this year. Is the cost of the labour for installing the furnace included in the Capital Cost Allowance?

one does not put the purchase cost of anything into CCA
CCA is an arithmetic calculation based on the prescribed rates given for the class

[GuyL]

porpoise1877, on Feb 8 2010, 12:57 PM, said:

I own a rental property and I had the furnace replaced in it this year. Is the cost of the labour for installing the furnace included in the Capital Cost Allowance?

It would be. Labour was part of the cost incurred in replacing it.

[JohnNP]

i believe the op is addressing the wrong issue actually, but thats up to him
best for the op to refer to http://www.cra-arc.g...ADME.html?=slnk



i shalll not respond to posts containing only personal attacks and flaming

[ChrisG]

"i believe the op is addressing the wrong issue actually, but thats up to him"

He's probably addressing the correct issue but looking at the expense wrongly.

[JohnNP]

ChrisG, on Feb 8 2010, 12:29 PM, said:

"i believe the op is addressing the wrong issue actually, but thats up to him"

He's probably addressing the correct issue but looking at the expense wrongly.

in at least two different ways

[porpoise1877]

JohnNP, on Feb 8 2010, 11:19 AM, said:

one does not put the purchase cost of anything into CCA
CCA is an arithmetic calculation based on the prescribed rates given for the class

I understand how CCA works and that it is depreciated at a certain rate based on what class it falls in. What I'm getting at is whether or not the labour portion is included in the amount that is depreciated or is it considered a current expense?

And what exactly is an 'op'?

[dunner]

porpoise1877, on Feb 16 2010, 03:49 AM, said:

I understand how CCA works and that it is depreciated at a certain rate based on what class it falls in. What I'm getting at is whether or not the labour portion is included in the amount that is depreciated or is it considered a current expense?

And what exactly is an 'op'?

The cost of labour (and generally any other related cost) is included in the cost of the asset that is included in the capital cost allowance class to be depreciated. One question I often get from people selling cottages is whether they can include their own labour in the cost. The answer to that one is 'no'. It has to be paid labour.

BTW, an 'op' is the 'original poster'.

[Bert_Mulder_CGA]

And then there is the consideration whether the new furnace is an improvement to the property, or a repair...

[GuyL]

Bert_Mulder_CGA, on Feb 16 2010, 12:32 AM, said:

And then there is the consideration whether the new furnace is an improvement to the property, or a repair...

That the whole crux of the debate.

From actual case articles I've been reading, it seems the CRA likes to consider actual replacement of something like a furnace or a roof as a capital expenditure (improvement) because if you sold the building, it is now "worth" more from being in better condition. Additionally, CRA includes "heating equipment" as being a depreciable part of a building:

http://www.cra-arc.g...html#P632_58016

I found a debate on that and other similar questions here that might be of interest:

http://www.milliondo...-deductions.htm

[Bert_Mulder_CGA]

I rely on tax law (including case law), rather than someone's (including CRA's) opinion and interpretation:

Where items replaced during renovations are not distinct capital assets but are part of larger assets used to produce income from a business, they will be deductible as expenses for repairs. However, where renovations are so extensive as to bring a new capital asset into existence, they will not be deductible. Damon Developments Ltd. v. M.N.R., 88 DTC 1128 (T.C.C.).

The brick veneer on a 13-year-old apartment building was falling loose and had to be replaced. Metal cladding was used. In determining that the cost was a deductible expense the Court emphasized the purpose of the repair. The taxpayer's intention was to repair a condition that had become dangerous, rather than to improve the asset. Gold Bar Developments Ltd. v. The Queen, 87 DTC 5152 (F.C.T.D.), reversing 85 DTC 513 (T.C.C.).

[GuyL]

That's the thing with the text of the law, it talks about "However, where renovations are so extensive" without really defining it. I was basing my earlier comment on case law as exemplified here (search "Victorio Pugliese" on the page):

http://www.centa.com...ideRentalIncome

This seems to be a case by case thing...