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We are doing a T1 for a couple that hava a rental property. 50% ownership each. There are assets and we believe that both spouses should get 50% of the capital cost allowance claim. What is happening is the CCA claim is being calculated at 100% for one spouse and 0 for the other. Form T776CCASummary column 12.
IE
Total Additions : 5000 Ea CL 8
Depreciation 20% = 1000 CCA for the year. Should this amount be 500 for both?
Feel free to ask more questions if I have not made myself clear.
On the T776, check to see if you marked the "Type of Ownership" as a co-ownership or as a partnership. CCA for a partnership is calculated at the partnership level - total CCA is calculated then 50/50 of the net income to each partner, assuming it is a 50% partnership. If it is a co-ownership, the co-owners share income and expenses according to their % of ownership, but CCA is calculated on their own cost of the property. Each co-owner records one-half of the capital cost in their own CCA schedule. In a co-ownership, they each own one-half of the capital assets and you should only record one-half of the cost. The decision as to whether or not to claim CCA is left up to each co-owner - sometimes, one may wish to claim CCA and the other not to claim.
Legally, a rental is a co-ownership. A partnership is technically a sharing of an ongoing operation with a view to profit, whereas a rental is the ownership of an asset which is owned for capital gain and which is earning investment income in the meantime. In practice, I find most T1 preparers record the rentals as a partnership to keep it simpler. If using the co-ownership option, you have to ensure that you correctly split the capital cost of all assets. This usually gets missed if the file gets moved to a new tax preparer. Also, I find the way Profile records CCA it does get confusing.
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