In order to assess deductibility, a few more things need to be considered. The operative sections of the ITA would appear to be Sec18(2) and Sec 53(1)(h).
Sec 18(2) generally prohibits deduction on a current basis of interest and property taxes on vacant land*, unless the property “is used in the course of a business…” or “held primarily for the purpose of resale” (ie inventory).
Sec 53(1)(h) allows those costs DISALLOWED by virtue of the above to be added to the ACB. If the costs were non-deductible for any other reason, they remain a lost cost and may NOT be added to the ACB. (simplified explanation)
So…if the property was resold as inventory, the gain is fully taxable with interest and taxes deductible in current years, and the loss carried forward applied against the gain on sale.
*I see the property actually had dwellings on it so the above is moot. Different considerations will apply. That was stated while I was typing!!