Eligible Capital Expenditures

Written By Passion Works Digital
Group of young professionals sit around a table with laptops, notebooks, phones, and tablets in front of them. A man and woman shake hands across the table. Bird's-eye view.

Eligible Capital Expenditures refers to intangible items such as:

  • goodwill

  • trademarks

  • customer lists

  • government rights

  • incorporation and reorganization costs

  • farm quotas

Cumulative Eligible Capital Account

75%, representing the inclusion rate, of all eligible capital property is added to a notional account called the Cumulative Eligible Capital Account (CEC). At the end of the taxation year, the taxpayer is allowed to deduct 7% of any positive CEC balance from business income. This deduction is referred to as amortization; the taxpayer has the ability to deduct up to the 7%. If the taxpayer has multiple businesses, each business would have its’ own CEC account.

Disposition

If the taxpayer disposes of eligible capital property there is a credit to the CEC account equal to 75% of net proceeds (proceeds of disposition (-) cost of disposition). The ACB is not accounted for in this situation.

Passion Works Digital https://passionworksdigital.com
Previous

Income Attribution Rules: Loans and Transfers
Next

Are You Capital Gains Exempt?