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AP $5-8($CCA$,$ Recapture, and Terminal Losses$-$Includes Taxable Capital Gains$)$

Microfast Ltd$.$ has a calendar$-$based taxation year ending December $31.$ As of January $1,2023,$

Microfast had the following UCC balances for its various depreciable property:

Class $1$

Class $8$

Class $10$

Class $13,175,500$

Other information related to the company's depreciable property is as follows:

Class $1$ The January $1,2023,$ UCC balance in class $1$ contains one property that is

a single building that was acquired in $2017$ for $$900,000.$ Of this total, $$200,000$ was

allocated to the land on which the building was situated and the remaining $$700,000$

to the building. On February $1,2023,$ the building, which was in need of considerable

repairs, and the land were sold for $$800,000-$$$200,000$ for the land and $$600,000$ for

the building.

A new building was purchased on November $15,2023,$ at a cost of $$1,450,000$ with

$$350,000$ of this total being allocated to the land on which the building was situated and

the remaining $$1,100,000$ for the building. Fifty percent of the floor space of the new

building is used for manufacturing and processing with the remaining $50\%$ used for office

space in support of the manufacturing and processing. An election was filed to include the

building in a separate class $1.$

Class $8$ On March $1,2023,$ the company purchased class $8$ property for $$111,256.$ As a

result of trading in older class $8$ property, the company received a trade$-$in allowance of

$$20,000,$ resulting in a net cost for the new property of $$91,256.$ The capital cost of the

property traded in was $$58,425.$

Class $10$ The January $1,2023,$ UCC balance in class $10$ reflects $10$ zero$-$emission

vehicles that are vans with limited seating capacity that are used to transport goods by the

company's sales staff. The vehicles were eligible for the $$5,000$ incentive offered by the

federal government, which reduced their pre$-$sales tax cost from $$44,000$ to $$39,000$ each.

Their capital cost totalled $$390,000.$ The company decided it would be more economical

to provide their sales staff with leased vehicles. To this end, the $10$ vehicles were sold for

total proceeds of $$150,000$ on October $31,2023.$ The amount received for each vehicle

was less than its capital cost.

Class $10\mathrm{.}1$ On August $1,2023,$ the company purchases a BMW $750$ for use by the

company's president. The capital cost of the automobile is $$142,000.$ The president drives

it $65,000$ kilometres in $2023,$ with only $10,000$ kilometres representing employment use.

The president is not a shareholder of the company nor are any family members. The vehicle

is not a ZEPV.

Class $13$ Some of the company's business is conducted out of a building that is leased.

The lease, which had an initial term of six years, can be renewed for two additional years

at the end of the initial term. Immediately after the lease was signed on January $1,2021$

Microfast spent $$216,000$ on leasehold improvements. In April $2023,$ an additional $$42,000$

of leasehold improvements were made on upgrading the property.

It is the policy of the company to deduct maximum CCA in each taxation year.

Required: Calculate the maximum CCA for the $2023$ taxation year. Your answer should include

the maximum that can be claimed for each CCA class. In addition, indicate the amount of any

recapture, terminal loss, or taxable capital gain that results from dispositions in $2023.$ The UCC bal$-$

ance at January $1,2024,$ is not required. Also comment on whether the company misclassified the

zero$-$emission vehicles as class $10.$ Assume that any purchases of depreciable property would have

met the conditions to qualify for the Accll. Ignore the availability of immediate expensing and any

GST$/$HST or PST considerations

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