You will need to divide the purchase and sell proceeds between a building value and a land value. Review your property tax assessment or contact a real estate agent for lot values at the time of purchase.
You will use the same proration for the sale as you will use for the purchase between building and land.
EXAMPLE (use your own applicable numbers)
As an example a property is purchased for $500,000 and the tax assessment breaks down the assessed value as Building $300,000 and land $50,000. for tax purposes. The Land value is $50,000/$350,000 = 14%. So the Building value for this purchase would be $500,000 x .86 = $430,000 and the Land would be $500,000 x .14 = $70,000. Creating an ACB of Class 1 building $430,000 and ACB Class 90 Land of $70,000.
Continuing with this example the property is sold for $475,000 with $15,000 in costs (real estate comm, legal). Again we need to proportion the Building and Land values based on the original factor of 86/14.
For the Building "Proceeds" will be $475,000 x .86 = $408,500 and for the Land $475,000 x .14 = $66,500 (Same split for the costs $15,000 (14/86).
The disposal of the Building results in a Terminal Loss calculated as follows ($430,000 - $408,500) + $12,900 (cost) =<$34,400>. This amount is entered as an Expenses, "Other" directly on the Rental form and described as a Terminal Loss.
The Land is dealt with as a Net Capital Loss under the "Income" tab > "Investments" and "Capital Gains". You will provide the prorated proceeds for the land in my example is $66,500 and the ACB would be $70,000 with "Outlays/Expenses" of $2,100.00. This results in a Net Capital loss of $5,600. This loss can only be claimed against a Net Capital gain either in the current year, three previous years (if applicable) or carried forward to a future year.
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