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New Member
posted Oct 29, 2019 11:40:57 PM

A friend is closing their business. He was depreciating his capital expenses. When closed, does he claim the full balance remaining on his T2125 or keep depreciating?

He is wondering how to report the capital expenses on form T2125 when he files his next tax return. He was depreciating his capital expenses while the business was operating but, once the business is closed, he was wondering if he should report the full balance remaining. (Or does he continue depreciating these expenses even after the business is closed? There are a number of years remaining over which these expenses were to be depreciated.) He is going to try to sell the equipment and will report any income. If he is unable to sell it or has to do so at a significant loss, how would this be reported? Thank you so much!  I appreciate any advice you are able to give.

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1 Best answer
Level 2
Oct 29, 2019 11:40:58 PM

If the business is now closed, he will have to show the assets as disposed of as a deemed sale back to himself due to change of use from business to personal.  CRA expects to see the disposal at fair market value.  He can look on the internet for similar makes and models of assets, and choose the lowest.  If he has claimed CCA, there is likely to be a recapture of a portion of the CCA added back to his income.  If he claimed GST/HST when he purchased the assets, he will need to remit the difference in GST between the original cost and the new disposition. If the fair market value is higher than the UCC, there may be capital gains to pay.

Remind him to close any GST/HST and payroll accounts.

3 Replies
Level 2
Oct 29, 2019 11:40:58 PM

If the business is now closed, he will have to show the assets as disposed of as a deemed sale back to himself due to change of use from business to personal.  CRA expects to see the disposal at fair market value.  He can look on the internet for similar makes and models of assets, and choose the lowest.  If he has claimed CCA, there is likely to be a recapture of a portion of the CCA added back to his income.  If he claimed GST/HST when he purchased the assets, he will need to remit the difference in GST between the original cost and the new disposition. If the fair market value is higher than the UCC, there may be capital gains to pay.

Remind him to close any GST/HST and payroll accounts.

New Member
Oct 29, 2019 11:41:00 PM

Thank you so much! This is extremely helpful. I really appreciate your advice and will pass it along to him. Thanks again.

Level 2
Oct 29, 2019 11:41:01 PM

You are welcome. 🙂