230v chase laan anassetata costo Asti could claim for the fi

2-30v chase laan anassetata costo Asti could claim for the first four years It is March, and Asto Company has just pur- BASIC and tax shield chased a Class 17 asset at a cost of $175,000. Asto\'s tax rate is 26 percent. te the amount of CCA Asto could claim for the first four years of the asset\'s life. b. What would the tax savings (shield) be for each year? c. Explain what is meant by the term \"tax shield.\'\"

Solution

a) Calculation for claim for first four years of the assets

Company buy assets for class 17 \" PARKING LOT \" Class 17 has a rate of 8%

First Year 87500( Half of $175000) x 8% = $7000 Expense Claim

Second Year $168000 ( 175000-7000) x 8% = 13440 Expense claim

Third year $154560 ( 168000-13440) x 8% = 12365 Expense claim

Fourth Year $142195 ( 154560-12365) x 8% = 11376 Expense Claim

b) Tax Saving

First Year ( 7000 x 26%) = $1820

Second Year ( 13440 x 26%) = 3494.40

Third Year ( 12365 x 26%) = $3214.90

Fourth Year (11376 x 26%) = $2957.76

c) Tax Shield is a reduction in taxable income for an individual and corporation achieved through claiming allowable deduction such as mortgage interest, medical expenses, charitable donations, amortization and donations.

These deductions are reduce a taxpayer\'s taxable income for a given year. Tax shield lower the owerall amount of taxes owed by individual taxpayers or a business.