Leaky Vacation rental condo repairs

-----Origi
My question is: Canadian-specific
QUESTION: Leaky Condo: We own a condo which we rent out as
a vacation rental. In 2005 it was discovered to be
leaking. Our personal Special Assessment is
$80,000. Where does one report this figure on the
tax form? As we are semi-retired and not in a high
income bracket, we have no need for huge income
reduction. How can the amount be spread out over a
few years? When the legal team finish sueing the
builders, we will probably receive a cheque to cover
some of the $80,000. This will probably be taxed?
How do we report this reimbursement? Where on the
tax form does one report it? (hopefully so it does not
bump you up into a larger tax bracket? Is this
possible?) Thank you,
---------------------------------------------------------------------------
david ingram replies:
you cannot deduct the $80,000 as a repair on a vacation rental.  You could
on a full time rental that was always a rental and was a rental BEFORE you
knew it was a leaky condo.
You would add the $80,000 to the ACB of the Unit as a class 1 Capital Asset.
You could then depreciate it (and the original cost) at 4% a year on a
diminishing balance basis which automatically spreads it over many years.
However, you can not use depreciation (capital cost allowance in Canadian
tax lingo) to create or increase a rental loss.
You can find an answer i gave on the COLCO (Coalition of Leaky Condominium
Owners) website at:
http://www.myleakycondo.com/ingram.htm
Hope this helps!
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