Vehicle CCA / UCC Sole Proprietor

Hi Everyone,

OK, so here’s the scenario.

In 2019, I bought a car for personal use.  In 2020, I started a business and added it to my tax return as class 10 using a FMV of $25,000.  The CCA was calculated as:

25,000 x 30% x 0.5 (half year rule) = $3750, but since my business use was only 40%, the max CCA I could claim is $3750 x 0.4 = $1500.  This would normally leave a UCC of $23,500.

However, the business had a loss in 2020 so I chose not to claim any CCA.  This now means that my UCC at the start of 2021 is 25,000.

In 2021 business use on the car was about 50% but the car was traded in for $20,000 (the vehicle purchased falls into class 10.1) so while working on my taxes for this year, I entered this as a disposition in Area D of my T2125.  This has now lead to a terminal loss of $5,000 ($25,000 UCC - $20,000 proceeds of disposition).

This terminal loss comes off my business income, but it seems like I’m missing something because this calculation seems to make an assumption that the entire vehicle was used for business which is not the case.

Am I doing something wrong or did I mess a step somewhere?

Any help would be greatly appreciated.

Thanks,

Frank