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Rental Property (Depreciation (Capital Cost Allowance) (The first year…

- - - - only basic services are being provided
      - the income only relates to the
        rental of the space
    - - additional services are being offered
        
        cleaning
        
        laundry
        
        security
        
        entertaiment
  - - - report each property on its own statement
      - combine all the properties on one statement
    - - All partners should report the same numbers for the same property
      - partner’s proportion allocated by applying the percentage
    - - cash method is allowable if generates the same reporting number
    - - fees for cancelling a lease
      - extending leases
      - granting subleases
- - - - any interest on mortgage and/or line of credit
    - - only 1 year worth of insurance
    - - materials
      - supplies
      - labour
    - - property manager
      - property agent
      - legal
        
        prepare leases
        
        collect overdue rents
        
        fight property tax assessments
        
        Legal fees incurred when a property is purchased cannot be written off. They are added to the cost of the property.
      - accounting
    - - Amounts paid by tenants non deductible
    - - 1 property
        
        used to transport tools or materials for necessary repairs to the rental property
        
        Cannot deduct vehicle expenses incurred to collect rents
      - 2 properties
        
        same as 1 property
        
        collecting rent
        
        supervising repairs
        
        managing the properties
    - - improvement
      - purchases
    - - Any board and lodging expenses are not deductible
    - - amounts paid including employee benefits are deductible
  - - - Capital expense
        
        depreciation / capital cost allowance (CCA)
        
        example
        
        Renovating a basement
        
        Replacing all the carpets with new hardwood floors
        
        New appliances including furnace, water heaters, etc
        
        Replacing all the windows with new ones
    - - ordinary expense and written off in the year that the expense is incurred
      - example
        
        Painting
        
        Replacing carpet
        
        Replacing the roof (grey area regardless)
        
        Fixing or replacing damaged floors, windows, doors, etc
    - - Capital expenses
        
        gives a lasting benefit or advantage
        
        improves a property beyond its original condition
        
        replacing a separate asset within a property. example: buy a fridge for a rental house
      - Current expenses
        
        recurs after a short period
        
        restores a property to its original condition
        
        repairing a property by replacing one of its parts
- - - - square feet
      - number of rooms rented
- - - - selling price < Undepreciated Capital Cost (UCC)
        
        Terminal Loss
        
        the difference between selling price and UCC
        can be deducted as an expense
      - selling price > Undepreciated Capital Cost (UCC)
        
        Recapture of CCA
        
        Depreciation is added to income
        
        taxed at regular marginal tax rate (not treated as capital gain)
  - - - subject to the usual capital gain rules