We sold an investment property resulting in large capital gains. If we purchased another investment property as pre-construction, can we include as an acquisition?

[annehuang]

Trying to determine if we can include pre-construction investment properties (that have not completed nor closed) as CCA acquisition

[Zack1103]

When you sell an investment property, you will generally have to pay capital gains tax on the profit. However, if you use the proceeds from the sale to purchase another investment property, you may be able to defer the tax through a tax-deferred exchange under Section 44 of the Income Tax Act.

Regarding CCA, it is a deduction that can be claimed on income tax returns for the wear and tear or obsolescence of certain assets, including investment properties. However, the rules for claiming CCA on pre-construction investment properties are different than for completed properties.

Generally, you cannot claim CCA on a pre-construction investment property until it is available for use or lease. Once the property is completed and available for use, you can begin claiming CCA on the property.

However, there are some exceptions to this general rule. If the property is a multi-unit residential complex with at least four self-contained units, you may be able to claim a portion of the CCA while the property is under construction, as long as certain conditions are met.

It's important to note that the rules regarding CCA and tax-deferred exchanges can be complex. 

For more information please see two Canada Revenue Agency (CRA) Website. 

1.  Summary Capital cost allowance
2. Claiming capital cost allowance (CCA)

 Thank you for choosing TurboTax!