 Hello, this is Wayland and I'll be talking about capital cost allowance or CCA. CCA is the tax version of depreciation. For financial accounting purposes, you are allowed to claim depreciation expense on many of your capital assets. For tax purposes, instead, you claim a CCA deduction. We have a simple example here involving a company called Super Consulting, which in 2014 has purchased its first and only vehicle for $30,000. We are assuming that Super Consulting's fiscal year end is December 31st. Let's put that $30,000 capital cost into the Class 10 CCA balance for Super Consulting. Class 10 is the class that applies to a motor vehicle under the CCA rules. Here is a simple example. The one and only asset in that Class 10 balance is this vehicle costing $30,000. We have our starting point, which is the $30,000 balance for Class 10. In the first year, which is 2014, we will be assuming that Super Consulting will be claiming the maximum available CCA deduction. Let's determine what that CCA deduction will be. The amount will be $4,500. We arrive at that figure by applying the 30% CCA rate, which is applicable for a Class 10 asset. We would usually apply that 30% to whatever the balance is for that class, which in this instance would be $30,000. However, in the year that you acquire a new asset, there is something called the half-year rule, which only allows you to claim half of what you're usually able to claim. That's how we arrive at the $4,500. We claim that $4,500 deduction for 2014, and that brings down our balance for the Class 10 down to $25,500. That remaining balance is called the UCC, which stands for undepreciated capital cost. Now we're in the year 2015. At the beginning of that year, our UCC balance is $25,500. Let's also assume that Super Consulting will be claiming the maximum CCA deduction available for 2015. The CCA deduction for 2015 will be $7,650, which is the 30% rate multiplied by the UCC of $25,500. That brings down our UCC to $17,850. That's our UCC balance at the end of 2015. We're in the year 2016. Our beginning UCC balance is $17,850. In April of that year, the business has decided to sell the vehicle. We'll be looking at three different scenarios for that sale. The first scenario is a sale price of $20,000. The second scenario is selling the car for $32,000, and the last is selling it for only $15,000. Under that first scenario of $20,000, the business is receiving proceeds of disposition of $20,000. How is that $20,000 treated for tax purposes? The difference between the $20,000 proceeds and the UCC of $17,850 is considered to be recapture of $2,150. It's called recapture because essentially the business is recapturing CCA or depreciation that it had previously claimed as an expense in a prior year. It's receiving that back when it received the $20,000 of proceeds of disposition. The tax rules require that recapture to be included in income. The second scenario for the sale of that vehicle is a sale at $32,000. We would have proceeds of disposition of $32,000. How do we report that for tax purposes? The difference between the capital costs, which is the original price that was paid for that vehicle of $30,000 and the UCC balance of $17,850, that difference is considered to be recapture of $12,150. So that is CCA that had been claimed in the prior year as a deduction, but now because of the sale of the vehicle that CCA has been recaptured back or received back in the form of that proceeds of disposition. And also the remaining difference between the proceeds of $32,000 and the capital cost of $30,000 is considered to be a capital gain of $2,000. So we include that $12,150 of recapture in income and we also include the capital gain in income. But we only include half of capital gain because that's the usual rule for reporting a capital gain. Only half of capital gains is considered to be taxable income. The third scenario for the sale of that vehicle is selling the car for only $15,000. So our proceeds of disposition is $15,000. So what that allows us to claim here, because that proceeds of disposition is less than the UCC balance of $17,850, we are able to claim the difference as a loss or specifically a terminal loss of $2,850. And that terminal loss is deductible from income.