I have a client who purchased a home/rental property in the mid 60s for $26K. 1/3 principle residence and the rest rental apartments. He sold it in 2022 for $800K.
2 or 3 issues. First, on valuation day in 1971 it was revalued to $100K (at least he thinks that was the case, no backup docs to prove or disprove). In 1994 their accountant filed T664 and claimed a further gain of $46,625. Revenue Canada could not provide me with a a copy of the T664 of course.
On the cca schedules there are both class 1 and class 3 assets. There was a major renovation done in the mid 90s which explains the class 1.
For the purposes of depreciation addback there is the problem of the value of the land when it was sold. There are no accounting records to refer to so is it reasonable to make the land value 25% of the sale price?
Correction. The land value when the T664 was filed
Presumably you will be recapturing 100% of the CCA that was claimed over the years so I don’t think it matters what the land value is or was in relation to the entire property; the capital gain will be the capital gain regardless of allocation between land and building.
If you are suggesting tax returns are not available to determine how much CCA has been claimed since 1971 and you are trying to impute CCA based on purchase price, renovations, V-Day values and a T664 election then I don’t think you can make any assumptions with respect to land allocation.
Over the years I have seen many T776 rental statements set up with nothing allocated to land and the entire property set up as a depreciable asset.
An interesting question though… since the building is used 1/3 as a principal residence and 2/3rds for rental purposes what proportion of the land could be considered as being part of the principal residence. The general rule is 1/2 hectare, but would the taxpayer only get to claim 1/3rd of the land? hmmm
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T664s ARE maintained by CRA, but in “permanent correspondence”. You likely need to make a written request to Taxroll. A regular agent will not have access.
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Now i remember why i retired 5 years ago…lol
What the heck is Taxroll?
I had a couple who filed the T664. When we requested the CRA copy for both husband and wife, they could only find one. Fortunately, at that time all the current numbers were identical. As foreign missionaries, their home was rented out and the garage held their personal items including tax papers. After they retired, they found the 1994 returns for BOTH! The same property and the same values across the board.