CAPITAL LOSS on Rental Property

[adeboloj]

Rental property sold at a loss in Canada and reported on T1 (resident of Canada) before departure date.
When completing 1040, seems to me there is no reason to include this on the return except additional paperwork - form 4797.
I am wondering if there is any benefit in reporting a capital loss on 1040 and if this is really required.
I asked because I read on the tax software that you dont even need to report capital gain on primary residence if profit is below 250k or so (not sure of the exact amount again).
Appears the GAIN is what the authorities are after ?

Thank you

[nelsona]

You never need to report a loss, but it would be useful in order to get the loss deduction, and against future gains.

[adeboloj]

I guess as much.
Thank you Nelsona!

[adeboloj]

Am i doing this right?
When I file out 4797 (Part II) to record the property loss on line 4 schedule 1.
The entire loss is been removed from my taxable income therefore creating a high refund.
I dont think the huge loss from the property sale is deductible ? Just wondering if 4797 is the right form to report loss from rental property?
Please any help will be appreciated.
Form 8949?

[adeboloj]

Sorry, I forgot to add the following:
When i use form 4797, loss from rental property is deducted from taxable income as such I get huge refund which is weird.
But when I tried reporting it as investment loss rather than business loss on form 8949.
The entire capital loss was recorded on schedule D and 3k was deducted from my taxable income, which seems reasonable.
Does 8949 seems to be right form to report sale of a rental property in Canada on 1040?

Thank you

[adeboloj]

Found answers on IRS website for anyone in similar situation:

Question
What forms do we file to report a loss on the sale of a rental property?
Answer
Rental property is income-producing property and, if you're in the trade or business of renting real property, report the loss on the sale of rental property on Form 4797, Sales of Business Property. Normally, you transfer the loss as an ordinary loss to line 4 of Schedule 1 and attach it to Form 1040, U.S. Individual Income Tax Return or Form 1040-SR, U.S. Tax Return for Seniors (PDF). If your rental activity doesn't rise to the level of a trade or business, but instead is held for investment or for use in a not-for-profit activity, the loss is a capital loss. Report the loss on Form 8949, Sales and Other Dispositions of Capital Assets in Part I (if the transaction is short term) or Part II (if the transaction is long term). If your capital losses are more than your capital gains, you can deduct the difference as a capital loss deduction even if you don’t have ordinary income to offset it. The yearly limit on the amount of the capital loss you can deduct is $3,000 ($1,500 if you are married and file a separate return). Normally, you transfer the capital loss to line 6 of Form 1040 or 1040-SR. See the Instructions for Form 8949, the Instructions for Form 4797 and the Instructions for Schedule D (Form 1040 or 1040-SR).

[nelsona]

Do you own several rental properties and carry on a business? I doubt it, so it is simply a Schedule D capital loss