2017 Market values in 2020

[nbryan]

My setup:

B2650HSD 280 hours
LA534A Loader SSQA 54" Bucket
42" 2,000lb pallet forks
BH77 backhoe
BB1560 Box Blade
B2782B Snow blower

Purchased together new, for my Manitoba construction business in 2017.

May need to close business this year, so sales tax will be owed to gov on the fair market value of this equipment as of this year.

Any opinions on how much % this tool kit would depreciate over the last 3 years in the FMV world?

My impression is not much. The kit was close to 40,000 before insurance and taxes. I'll probably be paying back gst for the same amount, or close.

Thoughts?

TIA!

 

[GreensvilleJay]

YOU (your company) doesn't pay the GST. That gets paid by whoever BUYS the kit. Yes, you have to charge it, as you have a GST #.
Been there, didn't do that, 4 year tax audit ...sigh... FEDS got nothing though...

You have depreciated the equipment (CCA8),so that's the MAXIMUM the FEDS think it's worth.
Have a look on Kijiji, Canadawide for similar kit as a ROUGH value.


PM me if you need more details...
Jay

 

[nbryan]

YOU (your company) doesn't pay the GST. That gets paid by whoever BUYS the kit. Yes, you have to charge it, as you have a GST #.
Been there, didn't do that, 4 year tax audit ...sigh... FEDS got nothing though...

You have depreciated the equipment (CCA8),so that's the MAXIMUM the FEDS think it's worth.
Have a look on Kijiji, Canadawide for similar kit as a ROUGH value.


PM me if you need more details...
Jay

I'm closing, not selling, the business. Sole proprietor. My depreciable assets will be deemed as sold to me when business closes. I claimed the equipment's original purchase tax as an ITC 3 years ago, so will now owe back its current worth of that tax.

My research so far does not show much depreciation on this tractor and implements, but there must be some? What's reasonable?

10%? 20%? Guesses and general impressionas welcome, I'm just trying to see if I'm way off base or not. Thanks!

 

[BravoXray]

Please talk to a CPA, it will be money well spent. Here in the US a tractor has a three year life, so under IRS rules you deduct 33.33 percent the first year, 44.45 percent in year two, 14.81 percent in year three, and 7.41 percent for the last year. I know your rules are different, but there is no sense paying more than you need to. My accountant has always saved me more then she costs, and I would much rather giver her the money than the tax man!

Good luck,

Jerry

 

[North Idaho Wolfman]

For you sadly, Kubota Tractors and Equipment do not depreciate at a subtainial rate.

 

[PaulL]

Agree on talking to an accountant. Book value may not have to match fair market value. But if market value is what you need to use, then no, that won't be favourable to you - they tend to drop 20%-ish in the first year (because new ones come with 0% finance and a warranty), but not much thereafter.

I'm sure you could find an equivalent tractor advertised 25% below purchase price if you looked around, and then probably legitimately assume the actual sale price was another 5% below advertised price. And if you printed out that advertisement and documented your rationale, the tax man wouldn't complain too much.

 

[dlundblad]

Shooting from the hip and using dealership math, if you paid 40, itll be worth around 30k. A dealer might say 25.

 

[GreensvilleJay]

Hmm.. what does you Schedule 8 say it's worth ? Equipment like tractors should have been depreciated 30% every year.
I've done that on my T2 for 3 decades....

 

[nbryan]

Hmm.. what does you Schedule 8 say it's worth ? Equipment like tractors should have been depreciated 30% every year.
I've done that on my T2 for 3 decades....

The Capitol Cost Allowance rate for this type of business equipment in Canada is 30%, indeed. So my Undepreciated Capitol Cost (UCC) for the 2019 tax year is around $24,000.

BUT!

The gov collects tax on something's FAIR MARKET VALUE, not it's UCC, when it is sold by the business. So I cannot use the UCC for 2019 for this equipment, unfortunately, as I'm quite sure this eequipment would be correctly appraised at a much higher value.

 

[nbryan]

Shooting from the hip and using dealership math, if you paid 40, itll be worth around 30k. A dealer might say 25.

That's the range I'm thinking too. I think I'll definitely have a chat with my 'bota dealer, see waht they say it could be worth.

Thanks!

 

[nbryan]

Agree on talking to an accountant. Book value may not have to match fair market value. But if market value is what you need to use, then no, that won't be favourable to you - they tend to drop 20%-ish in the first year (because new ones come with 0% finance and a warranty), but not much thereafter.

I'm sure you could find an equivalent tractor advertised 25% below purchase price if you looked around, and then probably legitimately assume the actual sale price was another 5% below advertised price. And if you printed out that advertisement and documented your rationale, the tax man wouldn't complain too much.

That's the thing: 've been looking around, I haven't a 2005-2008, low hour kit like this for much less than I paid new! The low-hours tractors by themselves are almost the same price as new - that is new with Kubota financing pricing too!

That's why I went new in the first place. I looked around for over 2 years, and all the used offerings were pretty much up there with new prices.