Tax term
Adjusted Cost Base
ACBThe tax cost of an asset for capital gains calculations. Original cost plus capital improvements, minus depreciation claimed and certain other adjustments. Critical for share sales and property dispositions.
Related tax terms
Definitions that come up alongside ACB.
Accelerated Investment Incentive
AIIA federal tax rule that lets you claim 1.5x the normal Capital Cost Allowance rate in the first year you put an asset into service. Improves cash flow versus the standard half-year rule.
Active Business Income
Revenue earned from the actual operation of your business, like selling products or providing services. Distinct from passive investment income.
Aggregate Investment Income
Total passive investment income earned by a Canadian-Controlled Private Corporation. Affects eligibility for the Small Business Deduction once it exceeds $50,000 per year.
Associated Corporations
Corporations linked by ownership or control. They share the Small Business Deduction limit, meaning a group cannot claim more SBD by splitting income across related companies.
Capital Cost Allowance
CCAThe tax depreciation system in Canada. Instead of deducting the full cost of an asset, you deduct a percentage each year based on the asset class.
Canada Revenue Agency
CRAThe federal agency that collects taxes and administers most tax programs in Canada.
Eligible Capital Property
Intangible business assets like goodwill, customer lists, and franchises. Treated as Class 14.1 for CCA purposes since 2017.
Eligible Dividend
A dividend paid out of corporate income that has been taxed at the general corporate rate. Carries a higher gross-up and dividend tax credit at the shareholder level.
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