Corp sold business years ago. Invested cash in undeveloped land expecting value increase over time. Capitalized property taxes into land over the years. FMV of land is below original cost, let alone prop tax additions. S/H wants to transfer land to self, wind up corp. Capital loss on transfer?
Shareholder loan exceeds FMV of land. ABIL?
What are the variables and values. Need more info?
Q1: Cash invested into corp? Then corp bought land? or bought land then s.85 land into corp?
Q2: If corp bought the land, value of land at time of purchase?
Q3: If land transfered into corp, value at transfer and ACB (Purchase Price).
Q4: Realized value determined when property transfered back to personal ownership.
Main question, why transfer land back out and pay transfer fees again? Is this a strategy that you would not want CRA to know about then take it offline.
Donât even have to look into much, stop loss rule will apply, so there wonât be loss. And you are going to be concern with all the capitalized costs.
My understanding is that if the client is holding the land as âcapital propertyâ paragraph 53(1)(h) would deny the addition of carrying charges (ie interest expense or property tax) to the ACB of the property.
If the client is a developer and holding the land as âinventoryâ those costs could be added to inventory by virtue of subsection 10(1.1).
believe you mean superficial and not stop loss, but generally agreed
however, if im not mistaken, the superficial loss gets added to the individual taxpayers acb, such that after all is said and done, the acb of the property for the individual will be equal to the acb of the property of the corp
, We will have to look at both suspended and superficial losses because it involves corporation and personal, but regardless, losses will be denied/suspended, and like @snoplowguy , said, if costs should not be capitalized, the addition to ACB will be even lower
Some more info. Corp purchased land for cash at arms length. Cash was proceeds of disposition of active business. Shareholderâs spouse was active realtor, likely to be treated as business transaction so added property taxes to holding costs of inventory. FMV well below accumulated cost. Property listed > 2 years without offers. Listing realtor documented recommendation of price to sell.
Will dividend R/E to shareholder before sale to S/H at FMV. Expect superficial loss denies loss to corp. ACB to S/H equals carrying accumulated cost of inventory.
Not sure how a âsuperficial lossâ comes into play here⌠Do you know what a superficial loss is?
Followed Jeff Liuâs comment. Do you agree that no loss can be claimed and that ACB passes to the shareholder?
Superficial loss is only if sold and repurchased within 30 daysâŚ
We really donât have enough info, but just for discussion purpose, is it still at FMV if you include the capitalized costs? Likely not,
FMV is below original purchase price. Undeveloped subdivided land in a resort area that has developed in the opposite direction so remains unserviced.
The transfer would need to be done at FMV, excluding the capitalized cost? and after the transfer there will no no asset, or r/e to do the dividend?
The intention is to dividend enough to increase present shareholderâs loan sufficient to transfer land at FMV and strip small cash balance. Loss on land and dividend will reduce R/E to nil.
Just focus on your intent, transfer land to self, must be done with FMV, I think you are trying to bury the losses into the land, so future capital gain is less, but ITA wouldnât allow that, ABIL must be active business, so that wouldnât work either,