Eligible Capital Expenditure

What is an eligible capital expenditure?

You may buy property that has no physical existence, but gives you a lasting economic benefit. Some examples are milk and egg quotas. We call this kind of property eligible capital property. The price you pay to buy this kind of property is an eligible capital expenditure.

What is an annual allowance?

You cannot deduct the full cost of an eligible capital expenditure, because the cost is capital and the eligible capital property gives you a lasting economic benefit. However, you can deduct part of its cost each year. We call the amount you can deduct your annual allowance.

What is a cumulative eligible capital (CEC) account?

This is the bookkeeping record you set up to determine your annual allowance. You also use your CEC account to keep track of the property you buy and sell. We call the property in your CEC account your eligible capital property. You base your annual allowance on the balance in your account at the end of your fiscal period. Keep a separate account for each business.

How to calculate your annual allowance

See Chapter 4 of Guide (T4003), Farming Income for the chart and instructions for calculating your annual allowance and the balance in your CEC account.

Farming income from the sale of eligible capital property eligible for the capital gains deduction

Part of your farming income from the sale of eligible capital property (ECP) that is qualified farm property may be eligible for the capital gains deduction. See Chapter 6 of Guide (T4003), Farming Income for the definition of qualified farm property. See Chapter 4 of Guide (T4003), Farming Income for the charts to calculate the amount eligible for the capital gains deduction from the sale of ECP.

Eligible capital property of a deceased taxpayer

Upon death, a taxpayer is deemed to have disposed of eligible capital property immediately prior to death, for proceeds of disposition equal to 4/3 of the cumulative eligible capital property at that time.

Forms and Publications

• Guide (T4003), Farming Income