Economics 2160A/B Lecture Notes - Lecture 26: Capital Cost Allowance, Tax Deduction, Retained Earnings
11 Dec 2017
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Corporation owned by shareholders (usually via transferable stock certificates: corporatio(cid:374)s are treated like legall(cid:455) (cid:862)artifi(cid:272)ial legal perso(cid:374)s(cid:863, pay taxes on income. Structure: taxable income * (apply) rate structure, types: small business they pay 15. 5% (federal + on, usually family businesses, manufacturing 25, general 26. 5% Firm is buying new physical capital at a particular time, using it over year, it will depreciate: value of that capital may decline over time. Loss of value over time or becomes obsolete. Expensing system under which assets full cost can be deducted in the year the expense is incurred (at acquisition: t = 1, cca = purchase price, 2. Straight-line if tax life is t, then you can deduct 1/t of purchase price in each year: this means that the cca is the same in every year, 3. Think about the pv of stream of tax deduction.
