# Tax Question - Capital Loss or Business Expense?



## JP_In_Rregina (Jul 24, 2011)

Hi There,

I hope someone can help me understand and clarify things for me. I have a Condo which is currently rented out. The condo board has recently requested every owner to pay special assessment of $8000 in two years time period. First Installment is due this year prior to December for about $5000.

Can anyone please help me understand if this cost can be counted as business expense or capital loss?

If this is a business expense, then my understanding is that I should be able to deduct it from the rental income.

If it is not a business expense, I am not sure how to take any tax reduction on my loss?

Many thanks for your help in advance.
Jignesh


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## FrugalTrader (Oct 13, 2008)

To me, it sounds like it's an ongoing expense (not a capital cost) and should be deducted from your rental income for the year.

What exactly is the assessment for?


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## Charlie (May 20, 2011)

theoretically it could be a capital cost which is just added to your cost base (so no tax benefit until you sell), or an operating costs, which is a rental deduction in the year incurred. 

Practically its almost always an operating cost. Certainly for that amount. So just add it to your rental expenses for the year.


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## Young&Ambitious (Aug 11, 2010)

Depends, is it a) to upgrade? If so, this is going to be added to your cost of the condo and you will deduct CCA annually which will act to reduce your rental income, but not to the extent that it may cause a loss. b). maintain or repair? If so, it will be a current expense.

Check out the CRA, it has a bunch of easy reads on rental income and expenses as this is such a common question: http://www.cra-arc.gc.ca/tx/bsnss/tpcs/rntl/crcp-eng.html


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## MoneyGal (Apr 24, 2009)

Young&Ambitious said:


> Depends, is it a) to upgrade? If so, this is going to be added to your cost of the condo and you will deduct CCA annually which will act to reduce your rental income, but not to the extent that it may cause a loss.


Yes, but this will likely cause a recapture of CCA at disposition. If you are going to counsel taking CCA on the expense, you should also note that the amount of CCA will be recaptured.


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## Young&Ambitious (Aug 11, 2010)

Yes, but if the levy is for an upgrade to be in compliance with tax law the levy amount will be added to the net book value of the property. There are many considerations to consider in deciding to elect to take CCA or not. I believe this year many will be deducting CCA if they believe the RE market will crash and bring down their rental property values.


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