My new client disposed of her rental property in 2022 for $400K. She bought it in 2008 for $600K. No CCA was ever taken on the property and she would be getting a terminal loss.
The property was never added to a CCA class; hence the segregation between land and building was never done. Now, I inherited the dilemma on how to calculate the proper terminal loss amount. From reading this forum, I understand that the best way to prove to CRA the land/building values (in case of an audit and given the amounts here I expect one anyways) would be a certified valuation. However, given that we are taking about 2008, it is not practical. Are there any other ways that we can go about figuring out the split? Property tax assessments (in Fort McMurray, Alberta) do not separate between the values.
Speak to a local real estate agent. They would have historical sales and can provide an opinion as to the breakdown both at the time of the original purchase and the current sale.
Wouldn’t it simply be a capital loss on the entire property? No split needed? Terminal loss is a CCA term and wouldn’t apply if it was never added to a CCA class.
I’m wondering if the fact that it “wasn’t added to a CCA class” matters…the fact is that it “should have been”.
And, it may be advantageous to do so as a TL is fully deductible, if values support that.
OTOH, there may be a gain on the building and a loss on the land…which would be a less happy proposition.
And @TimParris made the correct suggestion…speak to a local long-time R/E agent who can probably provide at least approximate values.
Thank you all for your input.
The realtor is a great idea as, at least, it will give me some idea of the numbers.
Land is not a depreciable asset so only the building is included for CCA purposes.
Correct…and yet, there could be a gain on the land (capital) and a loss on the building (terminal).
Don’t forget the special rules in that situation.