Client is self employed (T2125) . Client also sold a rental unit which produced capital gain (T776).
TaxCycle is allowing the CCA on his work vehicle to create a loss for his business which is being applied to reduce his capital gain on rental.
To my knowledge, CCA cannot create or increase losses, yet TC is doing it in this case.
Is there some obscure exception to the CCA loss rule that I’m unaware of that would allow the CCA to be transferred to his rental gain?
On the Motor Vehicle screen, do you have the km’s driven beside the T776 or beside the T2125?
I have the applicable mileage on both 776 and 2125
That is, he used the vehicle for both his business and his rental unit.
CCA cannot be used to create or increase a loss ON RENTAL (restricted under Reg 1100 somewhere - can’t remember the subsection)
No prohibition on business CCA. It’s a permissive deduction.
So, if I understand you correctly, you’re saying that we can allow the business to incur a loss created by CCA from his vehicle that can be used to reduce the net income on his rental units?
No. They stand separately. But the effect of the business loss is to reduce overall income, some of which happens to be from rentals (and dividends and employment income, pensions…etc).
So if they stand separately (which I’m not disputing) help me understand why TC would allow and apply the loss from his T2125 created by CCA on his vehicle to be used to reduce the capital gain from his T776.
Someone here is confused …(and it may well be me misunderstanding your point).
A T776 (Rental) does NOT give rise to a capital gain. They have nothing to do with each other. Not sure what you’re trying to establish here.
A loss on a T2125 (business income) is simply one component of any given taxpayer’s overall income. The business loss may well include a claim for CCA (which is quite acceptable).
Are you a tax pro?
This is probably where the problem is. The capital gain is NOT reported on a T776. It is reported on Schedule 3. CCA does not reduce anything reported on Schedule 3.
CCA cannot create or increase a loss on a T776.
CCA can create and increase a loss on a T2125.
There is no problem and the behavior of the program is correct.
You cannot create or increase a RENTAL LOSS buy claiming CCA on the RENTAL ASSETS.
There is no problem claiming business or other losses.
I just created a rental loss on a T776 but not with CCA. The client asked the tenant to leave in the previous year, but didn’t sell until 2023 so there was no income. Now TaxCycle says I must file a UHT (UHH).
The message in TC is asking you to indicate if the client is an affected owner. If they are excluded owners [as opposed to affected owners] they don’t need to file.
Thanks, @Rein, I worked on this until midnight for a client who asked several days ago if I could do this one as well. It is the last minute ones that seem to be the problem.
He sold his rental unit - showed up on his S3. Still taxcycle was trying to create a loss on his 2125 using CCA for his truck to offset capital gains from the sale of his rental unit.
Just asking if the loss created by the CCA on the 2125 is ligit and can be used to offset the capital gain from the sale of his rental.
The CCA on the T2125 is ligit to offset any other income or gain. (sorry, I did not mean that it would reduce capital gain - I meant any regular income or than capital gain.)
I’m out. Done with this thread.
This is not accurate. Business losses will offset ANY other form of income until exhausted.
(Yes, I thought I was done with this thread, but misinformation doesn’t help anyone.)
Yah, you are right haha got a bit confused between T1 and T2 