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Video instructions and help with filling out and completing Who Form 4797 Reduced

Instructions and Help about Who Form 4797 Reduced

Hi Peter Russell here from super taxi a welcome to another one my video blogs this is a continuation on my walkthrough of an example of a capital gain on the disposition of a rental property now in this example we are changing a bit of the terms and that instead that we're not wearing instead of making money on the disposition of our rental property resulting in the capital gain we are actually incurring losses on the sale of our rental property in this example so I am going to swing over to the big board now you've probably seen this example before in the last video it's pretty much the same figures are cod John's calculate John's calculated ACB of his properties three hundred six thousand we're still splitting 80/20 building land so our beginning UCC for our building is still two hundred and forty four thousand eight hundred dollars and the lands ACB is still sixty one thousand two hundred we're still selling in 2022 and we still have a UCC at the start of 2022 of two hundred and twenty one thousand and ninety five dollars now instead of selling for four hundred and fifty thousand dollars we have sold the home for only two hundred and fifteen thousand dollars maybe the market was bad for whatever reason we could not sell this property for more than two hundred fifty thousand dollars it cost us ten thousand seven hundred fifty in commissions and it cost us two thousand and legal fees so our net proceeds is two hundred and two thousand two hundred and fifty dollars we've definitely lost money this time now we've got to determine our capital loss on the land portion and what we call a terminal loss on the building portion so to start with the land what we would do is we take 202 to 500 our proceeds times twenty percent less are calculated ACB of sixty one thousand two hundred giving us a capital loss of twenty thousand seven hundred and fifty dollars now this capital loss can be carried forward indefinitely in court carry back against taxable capital gains three years now the building portion we're gonna end up with something called a terminal loss because we've taken depreciation on the building portion of a rental property and it's the only asset in our class once it's disposed of we can take a terminal loss so how do we calculate that to go here two hundred and two thousand two hundred fifty dollars times eighty percent less are ending UCC which is 221 Oh 95 giving you a capital loss sorry a terminal loss which can which is fifty nine thousand two hundred and ninety five dollars now what's different between a terminal loss and a capital loss well a capital loss you can only use against taxable capital gains you can carry them back three years and forward indefinitely in this case you can deduct your terminal loss against any other income in the current year so this would this would be shown in in this example the terminal loss would be shown as a negative figure on line 127 over t1 General Canadian Canadian income tax return line 127 the capital loss would be carried forward until like I said back three years or carried forward indefinitely until you how to taxable capital gain to use it against that's the difference between a terminal loss and a capital loss okay I hope you found this informative understanding what a terminal capital loss is when it comes to our disposition of a rental property and use of a capital loss on a disposition of a rental property you have any questions or comments please feel free to leave a comment below or you can send me an email a Peter at super taxi a thank you very much take care.

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