QUESTION: I had a rental property in Victoria, BC that became vacant. Not wanting to be a landlord anymore, I decided to sell. That process took over 5 months. During the vacancy period are the usual rental deductions still legitimate?
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david ingram replies:
interest, taxes and upkeep are NOT a deduction from current income if a property is left vacant while waiting to sell. They can usually be added to the ACB (adjusted cost base) for the purposes of capital gains.
This old tax case gives you an idea.
In 1986, Ivan Glavanovic lost his claim for five years of rental losses. He had built a house for sale in 1975 and was unable to sell it. He therefore rented it out at a loss for six years. DNR turned down his losses for 1979 and 1980. Judge Tremblay of the Tax Court of Canada agreed with DNR. He ruled that the rental was not to earn income but to hold on to the property. The losses were therefore capital in nature and should be added to the adjusted cost base of the house. It was also clear that there was no reasonable expectation of profit from the rental.
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