The question is an interesting one.
It is possible to make a profit while still having a negative cash flow.
For example, if a you give a renter 6 months credit you would have 6 months rent X 1,000 less cash expenses of 800 X 6 months. This would mean that your profit is (1000-800) X 6 = 1,200. However, your cash flow will be negative since you spend 800 X 6 in cash but get no cash from your rent (you gave him credit). All of this to say that cash flow and revenue and expenses do not go hand in hand.
Usually, a negative cash flow means that you are not making a profit. Say Rent 700, Expenses 900 Cash flow 700-900=-200 negative cash flow.
Your question is which expenses can I deduct when I have cash flow. Usually, all expenses can be deducted except one called Capital Cost Allowance. This expense is an elective one (often called depreciation) and, for tax purposes, cannot be deducted to increase the loss.
A good source of information for rental properties is to look at the Rental Guide on the Canada Revenue Agency website.
Here is the link.
http://www.cra-arc.gc.ca/E/pub/tg/t4036/README.html
Should you have any additional questions, please do not hesitate to send me an email.
Albert Ritchot CGA
[email protected]
