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Capital Gains on Rental property


Deo Rampersaud
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Hi @Deo Rampersaud, If you have disposed of 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).

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  • 8 months later...

Hi, I sold a rental property that I owned 50/50 with my spouse. 50% of the capital gain is being reported on both our schedule 3 and that 50% is being reported as income on line 12700. I was expecting only 25% to be reported on line 12700.

For example, capital gain is $100, split $50/$50 with my spouse and taxable at 50%, therefore only $25 should be added to line 12700 to both our returns.

How do I fix this?

Thanks

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Hey Spooner,

Looks like you need to provide a screen shot on how you filled out the form. Then its possible to point out the problem. Did you complete a single rental schedule and indicated 50% ownership with your wife? You need to provide more info as to how you completed the rental schedule.

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Hi, I have sold a condo unit rental property of mine in August 2021 and it was a rental property from Feb 2020 Until Mid June 2021.

Prior to that, it was my primary residence from 2016 to Feb 2020

I was following the steps from Nawal above but I am stuck on step 6....which class should I choose for the CCA?

What other information do I need in order to file taxes for this correctly?

Thanks.

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Hi BlazinSun,

You need to review this document for the class.

https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/sole-proprietorships-partnerships/report-business-income-expenses/claiming-capital-cost-allowance/classes-depreciable-property.html

I suspect you are dealing with a Class 1 building.

That said you need to understand what the acquisition cost is and what it includes. This Adjusted Cost Base (ACB) is not always the same as the Undepreciated Capital Cost (UCC), so be careful. Also the land should be allocated separately from any depreciable assets.

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  • 2 months later...

You need to indicate that the property is owned 50% each and then at the end of the data entry indicate that you want to have the schedule also reported on your spouse's return and then show the ownership at 50%. Do not fill out a rental schedule on your spouse's return.

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  • 3 weeks later...

Thank you @TheTaxSmith, i have the opposite problem but my co-owners are my two sisters.  I have been filing rental income and CCA for the property on a partnership level only.  Since we disposed of it in 2021, I entered partnership level amounts on the form for the building portion, and added a new non-depreciable CCA sheet for the land.  I entered the partnership level amount for that and it shows up on the Statement of real estate rentals as the partnership level amount (makes sense), but the generated capital gain schedule 3 turned into 1/3 of the partnership level amounts instead (i.e. 1/9 of the total).  Was i supposed to enter the business level amounts for the land on the CCA sheet?? but it looks wrong on the Statement of Real Estate Rentals when i do that... Do you know what is happening here?  should i tell it NOT to generate a capital gain form automatically and add one myself?

Thank you for your help - your answers to other questions on here have been super helpful to me too!!! 

 

On 3/31/2022 at 5:26 PM, TheTaxSmith said:

You need to indicate that the property is owned 50% each and then at the end of the data entry indicate that you want to have the schedule also reported on your spouse's return and then show the ownership at 50%. Do not fill out a rental schedule on your spouse's return.

 

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Hi IIyfan. To start what you have is probably a co-ownership and not a partnership so don't use the partnership percentage areas. Use co=ownership only. If the property is specifically rental and had no principal residence situation in the past you can have the gain calculated using the rental schedule (both land and building). The gains should then transfer to Schedule 3. Entering the data completely in the rental schedule for ACB, expenses for sale and disposition price should send the gain to Schedule 3 in the respective co-ownership %. So if all is owned equally you should see a gain of 1/3 on your return's Schedule 3 for both land and building then the 50% taxable capital gain should be transferred from Schedule 3 to your tax return. In the rental schedule data entry select as type of ownership "Co-ownership". % personal use as zero, share of ownership as 33.33% if owned equally. In the CCA data entry schedules (building and land schedules) enter the data as requested making sure you complete the area for ACB, Down further say Yes to Did you dispose of an asset?, which opens up some additional fields to complete. Ask to Calculate the capital gain and finally respond to the last question concerning liquidating all the assets in the class (if there was only the one). Do the same for the land schedule as well. The gain will be controlled by the co-ownership % on the rental statement. Review Schedule 3 after calculating/viewing the return.

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Ahhh.  I see! We do have co-ownership selected, %personal use 0 and share of ownership 33.33%.  We have been using the partner level % area in previous years to do separate CCA limits and claims (so we don't each claim the full amount of CCA for the building).  Where would we indicate this if we enter full business amounts for the CCA data?  For this particular property that we sold last year then, do we add the individual "UCC's" we've been individually keeping track of (we each used 1/3 of the total as our starting UCC) then to report as the full business amount of UCC this year?  eek..  Thank you so much, I see we may have been doing it wrong for years!!  .......

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The opening UCC needs to be the individual's balance from the prior year. The ACB needs to be the original amount from which CCA has been taken. Then "to whom the CCA should be allocated" use the partner selection. Now I suspect you will experience a Recapture of CCA, which is added as income, as well as a capital gain. Calculate the return and review the results specifically for the CCA schedule.

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Thank you again!  in this case should the ACB (for the building schedule) be the original full amount of the building portion or should it be 1/3 of the original amount for each individual on the CCA building schedule, if we select the partner selection for "to whom the CCA should be allocated"?

the building value actually dropped way way lower than the % building portion of the purchase price, so i think we will have a terminal loss there.  The land went up though, so I added the land schedule.  If i understand correctly then - we put the total land portion of the purchase price and ACB on the land schedule then, and not 1/3.  Is this correct?

Sorry for all these questions, thank you so much!

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Thank you @TheTaxSmith!  It looks like i have to enter partner level ACB also in the building schedule in order for that portion to show up correctly in the rental statement and schedule 3 whenever i select "partner level" for the CCA.  But the land schedule automatically divides into partner levels regardless what i select on the building schedule.  I think my confusion came from me assuming Area F on the land dispositions was supposed to be partner level as well but I see now there is no reason for that..!  Thank you so much for clarifying everything!!!

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On 4/14/2021 at 8:34 AM, Nawal said:

Hi @Deo Rampersaud, If you have disposed of 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).

I have never claimed CCA for the building or land. Now that I have sold the property do I need to fill out the CCA for building or land as in steps 6-11?

I filled all rental and expenses up to step 5 and for capital gains, To generate schedule 3 for capital gains I am adding it directly under "Capital Gains (or losses) and ABIL" > "Real estate, depreciable property...." section

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20 hours ago, Syed said:

I have never claimed CCA for the building or land. Now that I have sold the property do I need to fill out the CCA for building or land as in steps 6-11?

I filled all rental and expenses up to step 5 and for capital gains, To generate schedule 3 for capital gains I am adding it directly under "Capital Gains (or losses) and ABIL" > "Real estate, depreciable property...." section

I had a House

Date of acquisition: 01Jan2000 as Principal residence price was $250,000

25% area as rental income start in 2005

100% area as rental income start in 2017(market value was $800,000) and moving out to my daughter home, just one house own by me, that is the rental property.

2021 I sold my house price $1,000,000.

How to report this Capital gain in Ufile?

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