A piece of equipment is in Class 7 with a maximum CCA rate of 15%.The income tax rate is 40%.The tax savings from the CCA tax shield on this equipment for the first year was $1,500.What must have been the original capital cost of the equipment?
A) $3,750.
B) $25,000.
C) $33,333.
D) $50,000.

Question

Quizplus · Accepted Answer

The tax savings from the CCA tax shield is calculated as the CCA rate multiplied by the original cost and the tax rate. Given the tax savings is $1,500, the equation is: 0.15 * Original Cost * 0.40 = $1,500. Solving for the Original Cost gives $25,000 / 0.15 = $50,000.

A Piece of Equipment Is in Class 7 with a Maximum