Disposing of a building in the year

If you disposed of a building in the year, special rules may apply that make the proceeds of disposition you calculate an amount other than the actual proceeds of disposition. This happens when you meet both the following conditions:

• You disposed of the building for an amount less than its cost amount, as calculated below, and its capital cost to you; and
• You, or a person with whom you do not deal at arm's length, owned the land the building is on or the land next to it which was necessary for the building's use.

Calculate the cost amount as follows:

• if the building was the only property in the class, the cost amount is the undepreciated capital cost (UCC) of the class before you disposed of the building;
• if more than one property is in the same class, you have to calculate the cost amount of each building as follows:

If you disposed of a building under these conditions and you or a person with whom you do not deal at arm's length disposed of the land in the same year, calculate your deemed proceeds of disposition as shown in Calculation A. If you or, a person with whom you do not deal at arm's length, did not dispose of the land in the same year as the building, calculate your deemed proceeds of disposition for the building as shown in Calculation B.

Usually, you can deduct 100% of a terminal loss, but only 50% of a capital loss. Calculation B ensures that you use the same percentage to calculate a terminal loss on land as you use to calculate a capital loss on a building. As a result of this calculation, you add 50% of the amount on line 5 to the actual proceeds of disposition from the building.

Forms and publications

• Guide T4036, Rental Income
• Form T776, Statement of Real Estate Rentals

Related topics

• Line 9948 - Terminal loss

Date modified:

2016-01-05