Depreciable property is a business asset whose cost is written off over time through Capital Cost Allowance, because its useful life extends beyond the year it was acquired.

Buildings, equipment, vehicles, and certain intangible assets are depreciable. Land is not. The distinction matters because only depreciable assets generate CCA deductions, and the rate depends on the CCA class the asset falls into under the Income Tax Act.

When depreciable property is sold, the tax treatment depends on the relationship between the proceeds and the undepreciated capital cost. If proceeds exceed the UCC, the excess is recaptured as taxable income and fully included in the year of sale, not at the preferential capital gains rate. If proceeds are less than the UCC, a terminal loss is deductible. If proceeds exceed the original cost, the excess is a capital gain taxed at the preferential rate. Understanding all three outcomes before a sale allows tax exposure to be planned rather than discovered on the return.

The tax consequence of selling a depreciable asset depends entirely on its UCC at the time. See how Wefinx approaches tax planning.

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