Who benefits from the half-year rule when acquiring a capital property?

The half-year rule primarily benefits individuals or entities that make late purchases of capital property within a tax year. This rule allows them to only calculate depreciation based on the acquisition date rather than the full year, effectively providing a favorable tax treatment during that year.

When a capital property is purchased, the depreciation (or capital cost allowance) is generally calculated based on its full tax year. However, if a taxpayer acquires a capital asset late in the year—such as in the last half of the year—they are only permitted to claim depreciation for the time they actually held the asset. This provision thus prevents a situation where taxpayers incur a significant depreciation expense for an asset that they only owned for part of the year.

This targeted benefit offers a more equitable approach for those making late-year purchases, acknowledging that they would not enjoy the full tax advantages of depreciation they would have if they purchased the asset earlier in the year. The half-year rule is not broadly applicable to all taxpayers for any asset, nor is it exclusive to commercial property investors.