RESOLVED: Class 10.1 Addition With Trade-in Understated on S8Asset

When you enter a trade-in allowance on the S8Asset, TaxCycle incorrectly reduces the class 10.1 capital cost by the amount of the trade-in.


Price of class 10.1 vehicles: $57,000*
Purchase date: January 1, 2022

Purchase price paid in cash $19,000
Trade in (payment in kind) $38,000
Total payment $57,000

* 2022 class 10.1 ceiling amount = $34,000

Screen Capture: Class 10.1 Vehicle Purchase

TaxCycle understates the capital cost as $19,000, which also causes an understated CCA claim.

Screen Capture: 10.1 CCA Claim

The correct class 10.1 capital cost is $34,000, calculated as the lower of the gross purchase price of $57,000 and the 2022 class 10.1 ceiling amount of $34,000. The vehicle was paid for in cash and in kind. The trade-in is considered a payment in kind and must NOT reduce the capital cost.

Note: If a class 10.1 acquisition does not involve a trade-in, or if the net capital cost after the trade-in is equal to or greater than the class 10.1 ceiling amount (the 2022 class 10.1 ceiling is $34,000), TaxCycle correctly calculates the capital cost amount.

In the example, the capital cost amount net of trade-in is $19,000 ($57,000 minus $38,000) and is less than the 2022 class 10.1 ceiling of $34,000. Therefore, the calculated class 10.1 capital cost is incorrect.

Alternatively, if the trade-in amount in this example was much lower, such as $7,000, the capital cost amount net of trade-in would be $50,000 ($57,000 minus $7,000), and is at least the class 10.1 ceiling amount or above. Therefore, TaxCycle correctly calculates the class 10.1 addition amount.

Decision Chart

Use the following chart to decide whether to use the workaround when claiming class 10.1.

Was a trade-in entered as part of a class 10.1 acquisition?

Workaround Example

First, calculate the tax to be capitalized as part of the class 10.1 capital cost:

  1. Calculate the capital cost amount by subtracting the trade-in value from cost of addition.
    $67,383 - $44,822 = $22,561
  2. To determine the net capital cost, calculate the lower of the following two amounts:
    • Net capital cost amount from step 1: $22,561
    • Class 10.1 ceiling amount: $34,000
  3. Apply the tax rate to the amount from step 2.
    $22,561 × 12% = $2,707

Next, calculate the correct capital cost:

  1. Add the class 10.1 ceiling and the tax from step 3.
    $34,000 + $2,707 = $36,707
  2. If applicable, subtract any GST/HST input tax credit amount from the capital cost calculated in step 4. This is the final capital cost amount to use for class 10.1 acquisition.
    $36,707 - $0 = $36,707

Finally, enter the addition on the S8Asset:

  1. Enter the amount from step 5 in the Cost of addition field.
  2. Remove the amounts from the Trade-in allowance, GST/HST, PST, QST % and GST/HST input tax credit fields.

Screen Capture: Corrected S8 Addition


This issue was resolved in the latest TaxCycle update.