18 June 2004 External T.I. 2004-0073141E5 - Losses On A Rental Property

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.

Principal Issues: A taxpayer disposed of a rental property and incurred a capital loss on the land and a terminal loss on the building. There were accumulated losses from the rental operation in the years prior to the disposition. The issue is whether the rental losses would reduce an available capital loss or terminal loss.

Position: No.

Reasons: The Income Tax Act does not contain such a provision.

XXXXXXXXXX Randy Hewlett, B. Comm.

2004-007314
June 18, 2004

Dear XXXXXXXXXX:

Re: Losses On A Rental Property

We are writing in response to your e-mail of April 22, 2004, wherein you requested our opinion on the above-noted issue.

You indicated that you have a client who disposed of a rental property and incurred a capital loss on the land and a terminal loss on the building. There were accumulated losses from the rental operation in the years prior to the disposition. You inquired whether the rental losses would reduce an available capital loss or terminal loss.

Our Comments

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 are prepared to offer the following comment.

The Income Tax Act does not contain a provision that requires a taxpayer to reduce a capital loss or a terminal loss incurred on the disposition of a rental property by accumulated losses from a rental operation in taxation years prior to the disposition.

We trust our comments are of assistance.

Yours truly,

Randy Hewlett, B.Comm.

for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch