What is a potential disadvantage of the half-year rule for CCA?

The half-year rule for Capital Cost Allowance (CCA) essentially stipulates that when an asset is acquired, only half of its value is eligible for depreciation in the first year. This rule is in place to avoid large deductions in the first year for assets that are only partially in use during that period. By limiting the deduction to just half, it can create a disadvantage for taxpayers who might be expecting to recover their investments more quickly through higher depreciation claims.

This aspect of the half-year rule impacts cash flow management and tax planning for businesses and individuals as they cannot deduct the full capital cost of the asset they have just acquired. Thus, while it may serve the purpose of aligning depreciation with actual asset usage, it can delay the tax benefits that come from owning that asset.

The other options do not accurately describe disadvantages of the half-year rule. The rule does not allow for full deductions; it specifically restricts initial year deductions. It does not apply only to residential properties nor is it limited to new asset acquisitions. Therefore, the emphasis on the limitation of deductions in the first year aligns with the potential disadvantage presented in the question.