qualified property-tangible property under MACRS with a recovery period of 20 years or less (including off-the-shelf software) and qualified leasehold improvement
1361 --both titled the "Leasehold Improvement
Depreciation Act of 2007" --would make the 15-year recovery period for leasehold improvements
To simplify the system and permit both taxpayers and Revenue Canada to reduce resources devoted to the calculation and verification of CCA for leasehold improvements
(especially on the terminal loss and recapture calculations), we reiterate our recommendation that the Department of Finance adopt a diminishing balance aggregate pool system for Class 13 assets that operates in a fashion similar to the CCA system employed for most other assets.
Depreciation of leasehold improvements
occurred over a period that may have included both the initial non-cancelable lease term and the period after the early-termination option.
Prior to the AJCA, if a leasehold improvement
constituted an addition or improvement to nonresidential real property already placed in service, the improvement was depreciated using the straight-line method over 39 years, under Sec.
If the proceeds are used for qualified construction of leasehold improvements
to the space, the cash or rent reduction will not be included in the tenant's gross income.
The Cypress facility is expected to be occupied in the second quarter of 2007 after leasehold improvements
and central station operating infrastructure construction is completed.
If the tenant uses the money to make leasehold improvements
, different rules may apply (see below).
Based on this review as well as discussions with the Company's independent auditors and Audit Committee, the Company determined that its methods of accounting for (1) amortization of leasehold improvements
, (2) leasehold improvements
funded by landlord incentives and (3) rent expense prior to commencement of operations and rent payments, while in line with common industry practices, were not in accordance with GAAP.
Among these is a provision that would reduce the recovery period for leasehold improvements
from 39 to 15 years.
Generally, a lessee's leasehold improvements
are excluded from the lessor's gross income by Sec.
The above statements further assume that Nexia can obtain sufficient capital to execute expansion plans through outside investments including but not limited to obtaining significant leasehold improvements
and sufficient lines of credit to fund the design and manufacture of Black Chandelier products on a substantially larger scale.