Canada CCA and prior year losses


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Hi There... looking for some help. I have just begun a Corp. T2 which was previously done by another accounting agency. The 3 past years show a Continuity loss of approx. 40k. However, the previous agency had losses and increased them by also using the CCA. My understanding is that you cannot cause nor increase a loss using CCA. Is this correct? Also, current year has an income... can I use past year losses without using any CCA this year? Also wondering why someone would use all the CCA.. auto's are at zero, so if the client sells it, they have a gain.
 
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Werner Reisacher

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Your understanding is correct and I am wondering too. The only person who can give you an answer to this question is the accountant who kept the books. But you may want to compare also the Financial Statements versus the tax filings. He might have not used the CCA for tax reasons in the hopes to carry book losses forward into future tax periods.
 
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Hi Werner! Thank you so much for responding. I have the past 5 tax returns and the accountant definitely INCREASED losses in the last 3 years by using the CCA on the T2. How is it that the CRA doesn't reject it?
 
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Hi Werner, I was able to speak with the former Accountant and she stated that CCA can be used to create or increase a loss at the discression of the accountant. The CRA rule disallowing it is only in the case of a rental property (if one is not in the ongoing business of many rental properties). This was news to me! I wish CRA would be more clear in their bulletins!
 

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