explain cumulative eligible capital deduction?
what is it, and what is it used for?
- John QLv 410 years agoFavorite Answer
Cumulative eligible capital is tax lingo for intangible assets. Some examples are goodwill, licenses and franchise fees for an unlimited period. For tax purposes, these items can't be deducted as a business expense in the year acquired, but instead you are allowed to claim a percentage of the cost each year, which is known as your cumulative eligible capital deduction. When you acquire such an asset, 75% of the cost of the asset is added to your cumulative eligible capital account or CEC. The annual deduction allowed is equal to 7% of the remaining CEC balance.
- Fred SLv 710 years ago
You are probably talking about "cumulative eligible capital gains deduction".
Canadian taxpayers have a lifetime exemption of $750,000 of capital gains from the sale of a small business or farm property. As this is available during your lifetime, you need to keep track of it.
If your initial claim is $100,000 one year, and $50,000 the next, your cumulative eligible capital gains deduction is $150,000. It's "cumulative" because you add to it over your lifetime. It applies only to "eligible capital gains" (small businesses and farm property). It's a "deduction" because you deduct this amount from your income after showing the capital gain you made.
- EthelLv 44 years ago
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Most of the poor and middle class have little or no capital gains income. The most common way for most Americans to realize capital gains income is by investing in stocks or bonds above and beyond your 401k and IRA (which most people can't afford) or by selling your home. For the most part, capital gains tax cuts are designed specifically to benefit the wealthy at the expense of the rest of us. The rate is already a very low 15%, which is the primary reason that our supposedly progressive tax system is actually regressive for the super wealthy.