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Example for the calculation of recapture of CCA and terminal loss

In 2005, Peter bought a piece of machinery, at a cost of $10,000, for his business. It is the only property in its class at the beginning of 2011. The class has a UCC of $6,000. He sold the piece of machinery in 2011 and did not buy any other property in that class. The following chart gives you three different selling prices (proceeds of disposition) to show how Peter would handle each situation (A, B, and C).

Description	A ($)	B ($)	C ($)
Calculation of capital gain
Proceeds of disposition	4,000	8,000	12,000
Minus: Capital cost	− 10,000	− 10,000	− 10,000
Capital gain	= 0	= 0	= 2,000
Calculation of terminal loss or (recapture of CCA)
Capital cost	10,000	10,000	10,000
Minus: CCA 2005 - 2010	− 4,000	− 4,000	− 4,000
UCC at the beginning of 2011	= 6,000	= 6,000	= 6,000
Minus the lesser of:
The capital cost of $10,000 and the proceeds of disposition	− 4,000	− 8,000	− 10,000
Terminal loss or (recapture of CCA)	= 2,000	= (2,000)	= (4,000)

In situation A, Peter does not have a capital gain. However, he does have a terminal loss of $2,000 which he can deduct from his business income.

In situation B, Peter does not have a capital gain. However, he does have a recapture of CCA of $2,000 that he has to include in his business income.

In situation C, Peter has a capital gain of $2,000. He also has a recapture of CCA of $4,000 that he has to include in his business income.