Disposition of tools for an eligible apprentice mechanic

As an apprentice mechanic, you may decide to sell any or all of the eligible tools for which you claimed a deduction. If so, you must include, in your income in the year you sold the tool(s), the amount by which the proceeds of disposition of each tool is greater than the adjusted cost of the eligible tool sold. The proceeds of disposition of a tool is the amount of money you sold the tool for.

Adjust the original cost of each eligible tool you bought by using the following formula:

Adjusted cost of an eligible tool = D − (D x [E ÷ A])

where

D = the original cost of each eligible tool that you bought in 2018

E = the total of the tradesperson's tools deduction and apprentice mechanic tools deduction that you claimed in 2018Note de bas 1

A = the total cost of all eligible tools that you bought in 2018Footnote 2


Complete a separate calculation for each eligible tool you bought in 2018.

Example

Bill bought 2 eligible tools in 2018 for $4,500. Tool A and Tool B cost $2,500 and $2,000, respectively. Bill must calculate the adjusted cost of these tools. He calculates the adjusted cost of Tool A as follows:

Adjusted cost of Tool A = D − (D x [E ÷ A])

where

D = $2,500

E = $500 + $2,805Footnote 3 (from Deduction for tools example) = $3,305

A = $4,500

By applying this formula, the adjusted cost of Tool A is:

$2,500 − ($2,500 x [$3,305 ÷ $4,500])

= $2,500 − $1,836

= $664

Similarly, the adjusted cost of Tool B is:

$2,000 − ($2,000 x [$3,305 ÷ $4,500])

= $531

Assume that Bill sells Tool A in 2019 for $1,500. The proceeds of disposition of Tool A ($1,500) is greater than its adjusted cost ($664). As a result, he would have to include the amount of $836 ($1,500 − $664) as income on line 130 of his 2019 return. If the proceeds of disposition had been less than the adjusted cost of the tool, Bill would not have been able to deduct the difference.

Completing your tax return

Enter your claim on the Tradesperson's tools expenses line (1770) of Form T777, Statement of Employment Expenses.

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