Problem:

Your firm purchased a line of computer equipment for $1.5M four years ago. It is assigned a CCA rate of 20% and the firm has a tax rate of 35%.  At the end of this year (year 4 for the machine) you decide to sell the computer equipment and as a result you will terminate the asset pool. Calculate the tax implications under the following scenarios and classify each as a terminal loss, CCArecapture, or neither.

a. You sell the equipment for $691,200.

b. You sell the equipment for $2,000,000.

c. You sell the equipment $1,000,000.

d. You sell the equipment for $500,000.

e. The equipment is worthless.

Additional Information:

The question is from Finance and it is about CCA or capital cost allowance for machine for 4 years with tax rate of 35%. The old machine is being sold off and proceeds will in CCA. Resultant tax has to be computed.