You would claim it as a terminal
loss if you sold/disposed of the property at a loss, or a recapture if you had
a gain. A terminal loss would be subtracted from your rental income while a
recapture would be added. Both will clear out the remaining UCC balance, if there
is nothing else in the class.
If the terminal loss is more than
your rental income, you can create a rental loss. If your rental loss is more
than your income from other sources, your loss is considered a non-capital loss
and can be carried backwards or forwards.
On the T776 you would enter it as
a building disposition in Area E (line 9928 is the total). TurboTax will
calculate whether it is a terminal loss or a recapture, and put the amount in
line 9948 or 9947.
