Do I claim a terminal loss vs capital loss on a depreciable rental property upon disposing of the asset?

[ayseleren18 · Accepted solution]

Thank you for choosing TurboTax,

Yes, you can claim terminal loss from your rental income. As per CRA,  you will have a terminal loss when you have no more property in the class at the end of a year, but you still have an amount you have not deducted as capital cost allowance (CCA).

In the year you dispose of your rental property, you can subtract this terminal loss from your rental income and, if the loss is more than your rental income, you can create a rental loss.

However,  as per CRA, you cannot have a capital loss when you sell depreciable property. As mentioned above,  you can have a terminal loss. For more information, go to Column 6 – Undepreciated capital cost (UCC) after additions and dispositions (column 2 plus column 3....

Please visit the website of CRA on Selling your rental property and see our TurboTax article on Dos and Don’ts: CCA for Rental Property Explained to learn more about selling rental properties.

[mcob1010]

As per CRA,  you will have a terminal loss when you have no more property in the class at the end of a year but you still have an amount you have not deducted as CCA

I am assuming that the definition above applies if you have another rental property in the same class  but in a different location (other than the one where the property was sold from). Is that correct?

So, if you cannot claim a terminal loss because you have another property in the same class (even if that is in a different location than the one sold at a loss), what happens with the "capital loss"?  I still have an amount that is not deducted as CCA.

I cannot offset the gain from the other rental property cause the loss is bigger than that.  Can you carry that loss forward?  What happens to it? TurboTax does not seem to capture that loss to be carried forward but maybe I am mistaken.

Thank you!

[TurboTaxSusan]

You can't take a capital loss on an asset that you have taken CCA on. If you dispose of an asset at  a loss but still have another asset in that class, the CCA class pool "absorbs" the loss.