Principal Resident than Rental Property Sale

[zoeg]

I bought a condo in 2009 for $220,000.

In 2016, I bought a new house with my now husband and moved in with him. I had my condo appraised for $325,000 and rented it out.

I've claimed CCA since with the $325,000 price. My UCC for start of 2020 is in the $280,000 range.

I sold my property on June 1, 2020 for $250,000 so it is more than I purchased it for but less than appraised when I started renting it and less than the remaining UCC.

How do I enter this in Ufile???

[zoeg]

When I enter the CCA for 2020. It gives me a loss of $88,000 on rental income for 2020

That is offset by a capital gain of $23,000 when I enter the capital gain info.

Should I really be claiming a loss of ~$65,000 in rental income because the property went down in the years since rented even though it went up since purchased?

[Nawal]

Hi @zoeg, the ACB of the rental property is $325,000 since there has been a deemed disposition of the principal residence in 2016 at the same price. 

To report the sale of the rental property in the tax year, please follow the steps below:

1. On the "Left-side menu on the Interview tab", select "Interview setup".

2. On the screen that appears on the right, go to the "Rental income" group, check the box for "Rental property income", and click "Next" at the bottom of this page.

3. On the "Left-side menu on the Interview tab", click on "Rental Income", and on the new page that appears to the right, select "T776 - Rental income property".

4. A page will appear on your right, entitled "T776 - Rental property identification". Complete this page. You must specify the exact date of the sale of the building, which corresponds to the end of the fiscal year of this rental property, and, once the relevant information is entered, click "Next" at the bottom of this page.

5. On the "Rental property income and expenses" page will appear on your right. Remember to check the box indicating that this is the final year of operation. Subsequently, enter the income and expenses.

6. On the "Left-side menu on the Interview tab", under "Rental Income", click on "CCA". You must choose the depreciation category that corresponds to the rental property. By clicking on the category selected, a new page is generated on the right. You must complete it properly, by making sure to indicate the date of acquisition of the property, and by entering the amount in the field for "Opening balance of the undepreciated capital cost". To do so, enter the original acquisition cost, plus the capital additions made over the years, minus the total depreciation you have taken, if applicable.

7. For "Did you dispose of an asset in this class?" -Select Yes

Enter the amount for "Proceeds of disposition of an asset", meaning the proceeds from the sale of the building as well as the "ACB of the disposition", that is, the original value plus the capital additions minus the depreciation that you have claimed over the years.

8. In the field for "Description and amount of expenses associated with the disposition of assets", enter the expenses incurred for the sale of the building.

9. In the field for "Calculate the capital gain and carry the result on Schedule 3", choose "Calculate capital gain" from the drop-down menu. If you have a capital gain, the amount minus the expenses incurred for the sale of the building will be entered by the program on federal Schedule 3 and on Quebec Schedule G.

10. You must also enter the sub-heading "CCA" choose the following Class of property "Land - non-depreciable property" located at the bottom of the page.

11. You must enter all relevant information.

Do not forget to specify whether you have liquidated all the assets of this category on the line provided for that purpose, in both pages that you have completed for the property as well as for the land.

However, federal Schedule 3, as well as Quebec Schedule G if applicable, will be generated to indicate the capital gain (or loss).

[fanazul]

Hi - i have a similar situation except i dont know what was the FMV when I moved out and started renting.

Bought condo in 2007 for $202k (+ notary, welcome tax, etc) , lived there until 2017. then rented until 12/2020 when i sold it for $370k.

we only know the price increase by $168 in 13 years...or ~13k per year, that means only 3 out of the 13 are subject to capital gains taxes?..ie ~40k.

How i enter all this?

thank you

jose

[Nawal]

Hi @fanazul, in this case, we suggest you to contact our support team at support@ufile.ca . Thanks

[clw]

If you designate the condo as a principal residence from 2007 to 2017, the exempted capital gains = number of years designated as principal residence plus 1 divided by the years of ownership. So (11+1)/14 =12/14 of the capital gains are exempted from tax. If you complete the T2091 /TP274 correctly, you should arrive at those numbers. Hopefully you filed a change of use form for the condo for 2018 to 2020.

[fanazul]

thank you very much. 1. I have not filed anything for the change of use. 

2. I've just read about "plus 1"...

3. now it remains to be able to put those numbers in UFile...will try this weekend. But I dont see where to put the numbers of years as my residence and #of years as rentals...where is it really?

thank v much

 

[clw]

From the Interview section ‘CRA questions’, you answer ‘Yes’ to ‘did you sell a principal residence in 2020’ and click on ‘designation’. This will open the capital gains forms menu, scroll down to ‘personal use’ and click on (+). You are now in the section which will generate the T2091 and TP-274 (Québec) forms. Give the property a name and complete dates (2007 to 2020), price sold, and other requested info ACB (FMV+costs to maintain). As you enter property information, keep an eye on the ‘messages’  window below for errors or warnings. 

Under ‘designation’ from 2007 to 2017. The next line will ask you for change of use under articles 284 - 286 this is probably ‘No’, but study this line carefully.. When the return is generated, inspect forms T2091 TP274 to make sure they are filled correctly. You will need a realistic FMV number, before you started renting. Ask around for comparable properties. Don’t forget to complete schedule 3 for the rental portion of the condo.

This is not your case, but note that when years of designation = years of ownership, only three numbers are required: dates of acquisition and disposition and proceeds of disposition. The T forms are practically empty, and no capital gains appear anywhere in the return. This is normal! Good luck.

[Maggie RZH]

question:

i have triplex.

2009-2014: 100% rental

2014-2021: 50/50 rental/ personal use

in this case, Under ‘designation’  change of use under articles 284 - 286, do i go with "yes"? then enter 2009, 2014?

[Maggie RZH]

Another question:

2009-2014: 100% rental, when I fill out T2091, system still calculate the capital gain. Can I use "reserve disposition" to tell system not to generate capital gain?