Disposal tax effect

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Disposal tax effect is a finance term originating from Engineering Economics. When selling the last item of a specific class, the difference between the undepreciated capital cost (UCC) of an object and its salvage value (S) is the disposable tax effect (H).^[1]

In the case of S > UCC, then there has been a relative gain in the sale of the item, which gets taxed. These gains are known as "recaptured depreciation" or "recaptured CCA".

When S < UCC, then there has been a loss, which results in tax savings.

[edit] References

1. ^ Chan S. Park et al, Contemporary Engineering Economics (Second Canadian Edition), Addison Wesley Longman, 2001. ISBN 0-201-61390-5