How do I report a car I gifted to my son which had business use previously and therefore a CCA/UCC calculation?

[perfectpitch22]

The car had small amount of business use in prior year 2015 - just 5%.  There was no business use in 2016 before I gifted to my son in January 2016.

UCC showing on my 2015 file was $1968.47

Approx value when I gifted it was $4,000

[TurboTaxTerry]

Can you tell me if this was set up under class 10.1 or class 10 originally?

[perfectpitch22]

It was class 10

[TurboTaxTerry · Accepted solution]

You will provide "Proceeds of Disposition" as the Fair Market Value of the automobile on the date of transfer (you will need to determine this amount). There should be a recapture of any previous CCA claimed for the vehicle in preceding years and reported as income to the business in 2016. The maximum recapture will be the difference between the UUC balance beginning of year and the "Proceeds of Disposition".

[perfectpitch22]

When you wrote "Proceeds of Disposition" in parenthesis, i looked in Turbo tax for a option with the exact wording and couldn't find anything.  Am I correct in assuming that instead I should enter the fair market value of the car in the T125 section - Fixed Assets Sold - (Vehicle).  Turbotax presumably calculates the other things you mentioned automatically, so there is nothing else for me to do apart from the above mentioned entry?

[TurboTaxTerry]

Canada Revenue considers a change in use to be a deemed disposition or in other words sale of the asset. You can enter the UCC opening balance and "Fair Market Value" as the selling price. The recapture will transpose to the income for the T2125.

[perfectpitch22]

Thanks.  I have followed your instructions and entered the starting UCC balance ($1,377) and the fair market value ($5,000) and based on your comments expected the results to lower my Tax Refund amount by a small amount at least because as you said, the "sale" will be aas income by CRA and any increase in income usually means that the refund amount goes down.  However, no matter the amount I enter as the fair market vaue (eg I experimented my entering $50,000 temporarily just to see if I could produce any change), my refund amount remains the same.

I checked the forms entries and  both amounts ($1377 and sale price/proceeds of disposition of $5,000) are displayed correctly in the appropriate columns.  When I checked my business summary, I saw that my income (only a small amount of $1600 for this year) was the same as before I did the car calculation we have been discussing.  Again, based on your comments, I expected my business income to have increased to reflect the proceeds of the car calculation (eg $5,000 minus starting UCC balance of $1,377 = $3,623 in extra income)

It seems that I have done everything correctly, but just want to be 100% sure

Thanks

[TurboTaxTerry]

My assumption is that by entering the UCC and disposition under Part 11 "Motor Vehicles" and not claiming any motor vehicle expense (mileage) for 2016 the software as reduced the claim to zero as indicated at "Allowable portion of motor vehicle CCA" at the bottom of that table. You will need to create the Fraction 1/1 in Part 17, "Motor vehicle expenses" to allow for the recapture to report at Line 19 of the T2125.
If you are claiming any portion of Motor Vehicle (gas/oil, etc) expense in 2016 let me know and I will suggest an alternative solution.

[perfectpitch22]

That's correct, I am not claiming any vehicle expenses for 2016.  Although I did purchase a new vehicle, the business use is so small for what are very minimal earnings, it just seems too complicated, especially when it comes to disposing of that vehicle in a few years, as I am now discovering.

I followed your instructions and found Section 17.  However there is no option to create a fraction.  I see 2 columns for Vehicle A and B.

 I also see all rows with any data showing are displaying 0.00 as I haven't entered any vehicle expenses.  There IS a row for showing PERCENTAGE of business use but it is not possible to change/overide this as Turbotax is obviously calculating it based on the other data that has been entered.  Is this the row you meant and if so, how do I override and what do I enter?  It seems to me that even if I were able to enter 100% it wouldn't affect the result as it would be calculating 100% of zero.

[TurboTaxTerry]

The fraction will be created by entering 1 KM as total mileage and then 1KM as business mileage for the vehicle.