Capital Gains and CCA Recapture

toad · Post by **toad** » Tue Jan 08, 2013 12:27 am

Hi,

CRA finally processed my disposition (T2062/T2062A) of my Canadian rental property (I am US resident).

The guy who processed it took my capital expenditures and ADDED them to my initial purchase price which reduced my capital gains. From my understanding, they should have been added to my depreciated cost basis (UCC), which would reduce my CCA recapture.

When I file my T1 for the year, do I have to follow how they processed the T2062 or can I do it the way I believe to be correct?

Thanks

JGCA · Post by **JGCA** » Tue Jan 08, 2013 11:20 am

Capital Expeditures are added to the ACB, not the UCC if you have claimed CCA in Canada then this is recaptured, if the property was subject to US taxation this is also taxable too. You can not reduce recapture by reinvesting in the cost basis its will be taxed back.

toad · Post by **toad** » Tue Jan 08, 2013 10:22 pm

JGCA, not sure why I would add them to the ACB. According to CRA on the calculation of CCA recapture:

"Line 9947 - Recaptured capital cost allowance

A recapture of capital cost allowance (CCA) can occur when the proceeds from the sale of depreciable rental property are more than the total of:

the undepreciated capital cost (UCC) of the class at the start of the year; and
the capital cost of any additions during the year."

So it looks like when calculating recapture it is: tax rate * [ACB - (UCC + cap expenditures)]

And capital gains = (tax rate/2) * (Sale Price - ACB)

JGCA · Post by **JGCA** » Wed Jan 09, 2013 7:41 pm

Its added to teh ACB just like I said and the way the CRA auditor did it. What you read was out of context it related to recaptured CCA for items oreviusly added to the original cost (ACB) and then depreciated so now they are recaptured. One can not claim CCA then not recapture it by simply adding back cost to UCC it frst goes to ACB to reduce capital gain not 100% taxable recaptured CCA.