An investment allowance provides an annual deduction for your tangible capital investment at an LNG facility. If you have income from liquefaction activities at an LNG facility, you may be able to receive an investment allowance.
Your investment allowance is used to calculate your net operating income or loss.
You use your adjusted capital investment account (CIA) to track your capital investments and determine your investment allowance.
Calculate Your Investment Allowance
The amount of your investment allowance is based on the balance of your adjusted CIA.
Your adjusted CIA is calculated as though:
- only the capital cost of tangible capital investment property, less proceeds from the sales of tangible capital investment property were included in the account, and
- no deduction in relation to your CIA was made in determining your net income
While you include intangible property in your CIA, you don’t include it in your adjusted CIA when calculating your investment allowance.
Your investment allowance is:
- 3% x 0.75 x the current average balance of your adjusted CIA
The current average balance of your adjusted CIA is the sum of the balance at the end of the current tax year and the balance at the end of the previous tax year, divided by 2.
|Investment allowance =||3% x 0.75||($3 million + $3 million)|
|Investment allowance =||$67,500|
If your taxation year is less than 51 weeks, you must prorate your investment allowance for the number of days in your taxation year based on a taxation year of 365 days.
If you don’t add or remove tangible capital investment property in a taxation year, the value of your adjusted CIA won’t change for that year.
If your adjusted CIA at the end of a taxation year is less than zero, your balance is considered zero.
Partnerships engaged in liquefaction activities calculate the adjusted CIA at the partnership level and allocate the appropriate amount to each partner to calculate its own investment allowance.