Closing My Business

by Harry
(Canada)

Hi there.


May be a silly question but I can't find the answer on the CRA site.

I have decided to close my sole propieter home based business. I have $4000.00 worth of inventory on hand that I will personally use, and I have $1200.00 worth of capital property (shelves, computer, etc) (never claimed cca against).

How do I enter (adjust) these amounts on my final T2125 form.


Thank you. Harry




Hi Harry,

The CRA website is large and it is often hard to find what you are looking for.

I went searching under the A to Z index under C for Closing Accounts ... and here are the pages you want to visit:

For closing your CRA accounts try this page:

http://www.cra-arc.gc.ca/tx/bsnss/tpcs/lf-vnts/clsccts-eng.html


For deregistering your GST/HST accounts ... it's a bit of a procedure that is explained in this link:

http://www.cra-arc.gc.ca/tx/bsnss/tpcs/gst-tps/bspsbch/cncllng/clsng-eng.html


You must file form RC145 Request to close business number accounts.

Due to change-of-use rules, all capital property that has not been sold is deemed to have been disposed at fair market value (FMV) before you close your accounts and you self assess GST on the deemed FMV ... because some of the input tax credits granted when you purchased the assets for business use are recaptured.

Self assessed amounts are reported on Line 103 of your GST/HST return.

Here is the link to the change-in-use rules. You want from commercial to non-commercial use.

http://www.cra-arc.gc.ca/tx/bsnss/tpcs/gst-tps/bspsbch/itc-cti/cptl/prsnl-eng.html


I hope this helps you out Harry. If there is anything you don't understand, just post back.


Comments for Closing My Business

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Nov 29, 2011
 Capital Personal Property and Changes-in-use Rules
by: Martin, Canmore

How do I record the change in use of an asset from personal to business such as an electric appliance. Can I claim GST when it changes in use? How does it go?



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Martin,

Taxtips.ca explains that "there are special rules for GST registrants for claiming input tax credits on the purchase of capital personal property.

Capital personal property includes movable capital property, such as office furniture, computers, photocopiers, movable machinery and equipment, and free-standing appliances. Built-in appliances are fixtures, and are usually considered part of capital real property."

In CRA's publication GST/HST Memoranda Series 19.4.2 Commercial Real Property—Deemed Supplies, it states:

"8.The change-in-use rules that affect capital real property are different from those that affect capital personal property [my emphasis]. In general, ITC entitlements and the tax status of supplies, including deemed supplies arising from change in use, of capital personal property are dependent on the primary (more than 50%) use of the property. On the other hand, ITC entitlements and the tax status of supplies, including deemed supplies arising from change in use, of capital real property are dependent on the extent of the actual use (usually expressed as a percentage of the total use) of the property in commercial activities. (For a general discussion of ITCs and real property, see Memorandum 19.1, Real Property and the GST/HST.)"

CRA publication GST Memoranda G400-3-9 Capital Personal Property states:

"17. Under the rules in section 199 of the Act, a registrant may claim an ITC for tax paid or payable on the acquisition or importation of capital personal property if it is to be used primarily (generally more than 50 per cent) in its commercial activities. Where capital personal property is acquired or imported primarily for use in commercial activities, the registrant is deemed to use the property exclusively in such activities, and is allowed to claim an ITC on the full amount of tax paid."

Martin I hope this is what you were looking for, if not post back.

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