Equipment Leasing Support

by Mebs Pirani
(Toronto, Canada)

I am in a dilema. I have a customer who wants to lease high tech dental equipment.


I have suggested that the customer have the equipment portion on lease and the software portion on a loan to take advantage of the CCA write off.

My dilema is: what CCA class does the software portion of the high tech equipment fall under as per the CRA classification? Can the customer utilize class 52 (100%) write off which is available until January 31, 2011?

Please help.



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Hi Mebs,

As far as I know, computer (operating) software is classified under class 12. Only computer hardware and systems hardware can be classified under class 52.




P.S. I would like to remind you there is a difference between information and advice. The general information provided in this post or on my site should not be construed as advice. You should not act or rely on this information without engaging professional advice specific to your situation prior to using this site content for any reason whatsoever.

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Dec 01, 2010
 Class 12
by: Mebs Pirani

Hi:

Class 12 as you mentioned talks about software less than $ 500.00 which can be deducted at 100%. The software for the High Tech equipment if $ 45K.

What class does this fall under?

Thanks
Dec 02, 2010
 Computer Software
by: Bookkeeping Essentials

Mebs,

This is my understanding:

Computer software should be evaluated to determine whether it should be written off in one year or has a useful life of more than one year.

If the software has a useful life greater than one year, and is classified as computer software (as opposed to systems software), it should be categorized for tax purposes (as opposed to GAAP purposes) as Class 12. Although class 12 is 100%, it is subject to the half year rule.

Systems software is classified differently. I believe it is defined as computer programs and related procedures that facilitate the functioning of a computer system by other programs (ie an operating system). There are a variety of classes to choose from and you would have to select the most appropriate for your circumstances.

Your client should seek professional advice before he makes this purchase vs lease decision. If that is not possible, you should call CRA and get their opinion.

Another option is to visit The Tax Guy's Canadian Tax Resource Blog. He is a professional accountant and has a question and answer area at blog.taxresource.ca/.






P.S. I would like to remind you there is a difference between information and advice. The general information provided in this post or on my site should not be construed as advice. You should not act or rely on this information without engaging professional advice specific to your situation prior to using this site content for any reason whatsoever.
Dec 02, 2010
 Dental Equipment Lease
by: Frank Penkala

Please contact me if our firm may be of assistance in structuring the equipment lease for your client. Ensure that the structure contains a reasonable end-of-term value (min 10%). Feel free to call if you have any questions.

Regards,

Frank Penkala
President
LeaseDirect Canada Corporation
direct: 403-701-5877

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