QUOTE (ThomasBeyer @ Apr 18 2010, 09:01 PM) indeed re the $4000 .. I wrote in haste ..
Enlighten us on terminal loss please .. as I was advised by my accountant that a loss on sale of stocks or real estate canNOT be used against employment income but only against capital gains !!!
Here are the main asset classes for real estate
Class 1 4% Buildings acquired after 1987
Class 3 5% Buildings acquired before 1987
Bought Building Year 1 ....$500,000 (Class 1)
Claimed CCA Year 1.........$(10,000) (1/2 year rule)
UCC End of Year 1..........$490,000
Sell Building Year 2..........$480,000
Terminal Loss Claimed
Against Rent Income........$ 10,000 (490,000 (UCC) - $480,000 (Proceeds)
It just simply goes against your business/rental income which effectively reduces tax payable.
Thats why I`m not a huge advocate of claiming CCA every year. If there was a sudden downturn in the real estate market or if you came upon a huge deficiency with the property and you had to sell your income producing property and you didn`t claim very much CCA you could potentially claim the loss on sale against your income, perhaps giving you a bit more of a refund to soften the portfolio hit
Here is a link on a recently upheld Tax Court decision on allowing a Terminal Loss on the sale of buildings for a Limited Partnership, but the rules are the same for an individual.
http://www.cpd.cica.ca/incometax_GAAR-terminalloss.pdf
In the early to mid 90`s, during the real estate slump, people who were selling their homes, for whatever reason, started "renting" their basements or entire house for 6 months and then claimed huge terminal losses the following tax year creating an artificial tax refund. Revenue Canada at the time, disallowed the terminal losses not because it was on real estate but because there was no evidence of an actual rental business / operation.
I dont know if the rules are different for the ventures you are involved with but my explanation was in regards to the general and more common rental business operation. Definitely speak to your accountant or better yet find out why he doesn`t know this.
I thankfully haven`t had to calculate this amount during my short real estate career and I don`t plan to.