Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: In a situation in which a taxpayer disposes of a rental property, and was not entitled to deduct any CCA in computing income from the property pursuant to subsection 1100(11) of the Regulations, or chooses not to claim CCA, is it possible for a terminal loss to result on the property under subsection 20(16) of the Act?
Position: Yes.
Reasons: These facts alone would not affect whether a terminal loss is possible.
Randy Hewlett, B.Comm.
XXXXXXXXXX 613-957-8973
2002-017769
February 4, 2003
Dear XXXXXXXXXX:
Re: Technical Interpretation Request: Possible Terminal Loss
We are writing in response to your letter of December 5, 2002, wherein you requested our interpretation on the above-noted issue.
In your letter, you describe a situation in which a group of individuals own a rental property as "tenants in common". In some years, the rental activity resulted in a loss. In other years, the rental activity resulted in a profit prior to the claim for capital cost allowance (CCA). It is apparent that the individuals have either sold the rental property or are in the process of doing so. You indicate that a substantial loss will occur on the building, but there will not be a gain or loss on the land.
You inquire whether the individuals can claim a terminal loss on the building and if so, would it be deductible against other sources of income. Based on our discussions with you prior to submission of your letter (Hewlett/XXXXXXXXXX), we understand your main concern to be whether a terminal loss is possible on a rental property, in a situation where subsection 1100(11) of the Income Tax Regulations (the Regulations) has prevented the taxpayer from deducting any CCA with respect to property, or the taxpayer chooses not to claim CCA.
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we offer the following comments.
Whether or not a terminal loss results on the disposition of a building and is deductible under the Income Tax Act (the Act) is a question of fact that can only be determined with regard to all the circumstances surrounding a particular situation. The information that you have provided is insufficient to enable us to provide specific comments on your situation. However, in our view, the fact that subsection 1100(11) of the Regulations may have restricted a taxpayer from deducting any CCA on a rental property would not, in and by itself, preclude the deduction of a terminal loss under subsection 20(16) of the Act.
We trust our comments are of assistance.
Yours truly,
John Oulton, CA
Manager
Business and Individual Section
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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