Canada Revenue Agency
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Disposition of tools (tradespersons)
As a tradesperson (including an apprentice mechanic), you may decide to sell any or all of the eligible tools for which you claimed a deduction. If so, you must include, in your income in the year you sold the tool(s), the amount by which the proceeds of disposition of each tool is greater than the adjusted cost of the eligible tool sold. The proceeds of disposition of a tool is the amount of money you sold the tool for.
Note
If you are an employed apprentice mechanic, go to Disposition of tools for an eligible apprentice mechanic to calculate the adjusted cost of the tools you purchased.
Adjust the original cost of each eligible tool you bought by using the following formula:
| Adjusted cost of an eligible tool = D − (D × [E ÷ A]) | ||
| where | ||
| D | = | the original cost of each eligible tool that you bought in 2011 |
| E | = | the tradesperson's tools deduction that you claimed in 2011 |
| A | = | the total cost of all eligible tools that you bought in 2011 |
Complete a separate calculation for each eligible tool you bought in 2011. |
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Example
Karsten bought two eligible tools in 2011 for $2,500. Tool A and Tool B cost $1,500 and $1,000, respectively. Bill must calculate the adjusted cost of these tools. He calculates the adjusted cost of Tool A as follows:
| Adjusted cost of Tool A = D − (D × [E ÷ A]) | ||
| where | ||
| D | = | $1,500 |
| E | = | $500 (from Deduction for tools example) |
| A | = | $2,500 |
By applying this formula, the adjusted cost of Tool A is:
$1,500 − ($1,500 × [$500 ÷ $2,500])
= $1,500 − $300
= $1,200
Similarly, the adjusted cost of Tool B is:
$1,000 − ($1,000 × [$500 ÷ $2,500])
= $800
Assume that Karsten sells Tool A in 2012 for $800. The proceeds of disposition of Tool A ($800) is less than its adjusted cost ($1,200). Since his proceeds of disposition is less than the adjusted cost of the tool, he would not have to include any amount as income on line 130 of his 2012 return. However, Karsten cannot deduct the difference as a loss.
Completing your tax return
Enter your claim on the Tradesperson's tools expenses line (1770) of Form T777, Statement of Employment Expenses.
