bare recreational lot sale

[Click59]

hi

I sold an empty recreational lot in a strata development for a profit.  i understand that i have to pay capital gains of 50% of the profit but that i can deduct some things such as legal fees from the total.  i paid to have the lot serviced with electricity, water, and a septic field ( approx $10,000).  Can i deduct those expenses from the total also?

Thanks

C

[TurboTaxAllen]

Hello,

First, let us assume you are not in the business of buying and selling recreational building lots, nor was the lot rented or otherwise used to earn income.

For personal use property such as a recreational building lot you that was acquired and later sold you will need to determine the Adjusted Cost Base.  The Adjusted Cost Base will include the original purchase price, costs associated in acquiring the property including land transfer taxes, lawyer fees, registration fees or inspection fees.  Betterments, like you’ve mentioned in getting utilities installed (electricity, water and septic) would also be capitalized and added to the Adjusted Cost Base. However, for personal use property, mortgage interest, municipal property taxes and other expenses incurred to maintain the lot are not tax deductible.

Please retain all receipts for the expenses you incurred in bettering your lot, as well as the original purchase and sale documentation should they be required at a later date by tax authorities.

Please report these amounts in TurboTax under Capital Gains > Sold “…Real Estate…” > Sold Personal Property.

For your reference, the CRA Rental Income Guide T4036 has additional information on the tax treatment of vacant land. See: https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4036/rental-income...