Selling a building
If you sold a building of a prescribed class, special rules may make the selling price an amount other than the actual selling price. This happens when you meet both of the following conditions:
- You, or a person with whom you do not deal at arm's length, own the land on which the building is located, or the land adjoining the building if you need the land to use the building
- You sold the building for less than its cost amount and its capital cost
Calculate the building cost amount as follows:
- If the building was the only property in the class, the cost amount is the undepreciated capital cost (UCC) of the class before the sale
- If more than one property is in the same class, you have to calculate the cost amount of each building as follows:
- Capital cost of the building
- divide Capital cost of all properties in the class that have not been previously disposed of
- times UCC of the class
- equals Cost amount of the building
Note
You may have to recalculate the capital cost of a property to determine its cost amount in any of the following situations:
- You acquired a property directly or indirectly from a person or partnership with whom you did not deal at arm's length
- You acquired the property for some other purpose and later began to use it, or increased its use, to earn rental or business income
For more information, call 1-800-959-8281.
If you sold a building under these conditions, this may restrict the terminal loss on the building and reduce the capital gain on the land. For more information, see Guide T4036, Rental Income, or Income Tax Folio S3-F4-C1, General Discussion of Capital Cost Allowance.
When you sell only part of a property, you have to divide the adjusted cost base (ACB) of the property between the part you sell and the part you keep.
When you sell only part of a property, you have to divide the adjusted cost base (ACB) of the property between the part you sell and the part you keep.
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Example
Lily owns 100 hectares of vacant land of equal quality. She decides to sell 25 hectares of this land. Since 25 is one quarter of 100, Lily calculates one quarter of the total ACB as follows:
Total ACB $ 100,000
Minus
The ACB of the part she sold ($100,000 x 1/4) – 25,000
The ACB of the part she kept = $ 75,000
Therefore, the ACB for the 25 hectares she sold is $25,000.
For more information on selling part of a property, see Archived Interpretation Bulletin IT-264R, Part Dispositions and its Special Release.
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