I hope someone can provide some insight. I sold a residential rental property in 2012.

1. I bought the property in 2002 and reported rental income/expenses on T776 since then.
2. Never depreciated the property on T776.
3. Sold it at a loss.

I am reporting on T776, 2012 as the final year of operation.

As I understand, I can't claim it as capital loss (on Sch 3), but seems to indicate I can claim as a terminal loss and thereby create a rental loss.

But terminal loss seems to be calculated based on undepreciated capital cost and I did not depreciate the property.

So, how do I claim the loss or report the loss?

Thanks.

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Dimple2001

Update...

I spoke to a CRA agent. He confirmed that I cannot create a capital loss but I can indeed create a terminal loss, which turns out to my benefit (sort of). There is an example on the CRA website and I am going to use that example as a template to attach a supporting sheet of paper with all the breakdown of the numbers.

Because, it is a terminal loss, it will be a reduction in the taxable income.

He said something about carrying forward the terminal loss in the future. Does anyone know how it can be done or the concept behind it? is it similar to carrying unused RSP contribution limit available for deduction? Thanks again.

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Dimple2001

I am sorry no one got to your query earlier.

You are correct, there will be a terminal loss on the sale of the rental property. There won't be a capital loss because the rental property is a depreciable property.

It will be difficult to communicate how to report it on your tax return, as the differences arise in the various tax softwares. But generally, on the T776, include the terminal loss on line 9948. Then, you can report the proceeds and cost of disposition in the Area A & E charts that will follow on the T776.

The rental loss will be a non-capital loss, available for carryforward for 20 years. The rental loss will appear on line 126 of the tax return. You need not worry about having it carry forward, as the CRA will keep track of that. You may choose to carry it back, using a T1-A: Request for a loss carryback at http://www.cra-arc.gc.ca/E/pbg/tf/t1a/README.html.

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Madan Chartered Accountant team
http://www.madanca.com" rel="nofollow">LINK

Thanks.

My issue is all settled as of April 2013. I spoke with CRA, attached few examples from their website and attached my calculations based off those examples and they accepted it.

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Dimple2001