Changing from personal to rental use

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Changing from personal to rental use

If you bought a property for personal use and then started using it in your rental operation in the current tax year, there is a change in use. You need to determine the capital cost of the property at the moment of this change of use.

If the fair market value (FMV) of a depreciable property (such as equipment or a building) is less than its original cost when you change its use, the amount you put in Column 3 - Cost of additions in the year of either Part B or Part C is the FMV of the property (exclude the land value if the property includes land and a building).

If the FMV is more than the original cost of the property (such as equipment or a building) when you change use, use the following chart to determine the amount to enter in Column 3 of Part B or C.

Capital cost calculation (Change in use)

1. Actual cost of the property

$ Blank space for dollar value
Line 1

2. FMV of the property

$ Blank space for dollar value
Line 2

3. Amount from line 1

$ Blank space for dollar value
Line 3

4. Line 2 minus line 3 (if negative, enter "0")

$ Blank space for dollar value
Line 4

5. Enter any capital gains deduction claimed for the amount on line 4 1

$ Blank space for dollar value
× 2
$ Blank space for dollar value
Line 5

6. Line 4 minus line 5 (if negative, enter "0")

$ Blank space for dollar value
× 1/2
$ Blank space for dollar value
Line 6

7. Capital cost: line 1 plus line 6

$ Blank space for dollar value
Line 7

1 Enter only the amount that relates to the depreciable property.

Note

We consider you to acquire the land for an amount equal to the FMV when you changed its use. Enter this amount on line 9923 in Part F of Form T776, Statement of Real Estate Rentals.

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Date modified:
2017-01-03