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Tax question re: T776 expenses related to tenancy dispute

April Dale

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Hi there,

I am currently a customer using Ufile Pro.  I have a client with a rental suite in their principal residence which they have rented for many years.

They had a tenant which they asked to move out (with written notice and sufficient amount of time to move) so that their son could move into the suite.

The tenant mentioned above, did move out and then found out that their son did not move in (change of plans) so the former tenant then filed a dispute resolution through the BC Residential Tenancy Branch.  The former tenant's (applicant) dispute description states:  "I was evicted on the pretext of their son moving into my suite that I was renting.  I have observed and am aware that the suite hasn't been rented to their son.  I had to relocate to another part of town.  Due to this my rent has increased substantially."

The former tenant was asking for 13900.00 but settled with the landlord (my client) for 10000.00 in 2022.  So they are out the 10000.00 plus legal fees of approx 2640.00.

Can the 10000.00 plus legal fees be deducted against the rental income from new tenant (14000.00) in 2022?

Please help, I have scoured CRA's website and tried to google this many times but I can't find a clear answer to this.  I also tried to call CRA but they are unavailable because of the current labour dispute.

Thank you,



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Hello April Dale,
Uncollectible rent

You can have losses from uncollectible debts or a portion of an uncollectible debt. You can deduct this amount from your gross rental income.

To be eligible, the debt must:

    be owing to you at the end of the tax year
    have become uncollectible during the tax year
    have been included or deemed to have been included in your income for the year or a previous tax year

Proof is required to determine an uncollectible debt. This could be a notice to creditors from the trustee in bankruptcy, correspondence from the tenant, or some other assurance that the tenant was pursued without success of receiving a payment from them. Only debts that are certain of being uncollectible are to be considered bad debts.

You may have a case where you do not receive payment for rent, which is referred to as a bad debt. If, during the year, you receive any payment that you wrote off in a previous year as bad debt, you have to include the amount in your income for the current year.

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