TaxCycle | Products | Pricing | Training | Documentation | Support | News

Need help with CCA claim, TIA

Hi everyone! I have been learning so much from this group & want to thank you all.

I am struggling with a new client & need some help here. New Corporation bought a 21 year old apartment building in Ontario with 14 residential rental units. No document shows the breakdown of land vs building. How do I determine the class & the amount to be used for CCA. I am getting conflicting information. Thank you so much!

Niina

More expensive, but also most correct route: Certified Appraiser Report(s).

Cheap, DIY version: breakdown from Property Tax bill.

Note: defense of numbers may be required in either case if CRA decides to challenge (have never had that happen though…others may have comments).

1 Like

Thank you very much for your response.

“a 21 year old apartment building in Ontario with 14 residential rental units. No document shows the breakdown of land vs building”
.
.
.
It didn’t occur to the purchaser’s lawyer at the time of negotiation? (Oh wait, what am I thinking - the expert Realtors ran the show…:frowning: …)
Also…
Are the Sellers a DIY family with regards to all of their Legal and Accounting work?..
.
Or,
Surely this issue has already occurred to the seller’s Accountant and the sellers Lawyer?. They will HAVE TO be reporting their idea of same on their applicable tax return already, in the current tax year…
.
Send them a letter asking them…
… Document their response
.
.
Perhaps they have allocated $1 POD to the building so that they can create a Terminal Loss… :wink:
.

All true Joe, but where the sales agreement does not provide for a mutually agreed valuation, each is free to use his/her/its own. (I had a case like that when I worked in Appeals…rather contentious at the time, but I believe subsequently there have been TCC or higher decisions on same.)

I wasn’t disagreeing with you SmallBizGuy, and sometimes these issues can be problematic - also, some Provinces do not even do a breakdown (an in any event, they are just using those global figures to arrive at an estimate for a property tax calculation only).
.
Clearly this case in this thread is revenue producing property on BOTH the sellers AND the buyers sides, and real tax income/deduction amounts are involved - So in this case I would be inclined to use a Certified Appraiser in the absence of obtaining a contractual amount.
.
.
If a CRA Auditor did not examine the reporting on BOTH sides, IMHO his auditing skills ability would be on the low side… (FMV refers to both sides - for the transaction to have been completed, somehow, both sides in fact did come to a specific valuation agreement - they just failed to write everything down).

It’s funny sometimes how agreements come to “be”. Often there is a good underpinning - there may actually BE appraisals on the vendor side…but they either never got passed on, and clearly, in this case anyway, never formed part of the agreed values.

In a similar vein, asset sales of small businesses cause many of the same headaches…there is simply “a” value, unarticulated as to distribution…and that is more of a pain as there really is no third party to fall to. At least in real property there can be multiple appraisals - though sometimes they simply can’t come to agreement on values, too.