how do i record a disposal of a rental property

Real estate generally has two components:  land and building.  The exception will be a condominium in an apartment-style building, which has building only.  To do this properly, you will need to know the relative values of land and building when the property was purchased and also when the property was sold.

You take the cost of the property - what actually paid plus any other fees such as legal.  Then you apportion said cost between land and building.  Let us say, for example, that the property cost $100,000 (including legal) and you have determined the land was 40% and the building 60%.  Then the ACB of the land would be $40,000 and the building would be $60,000.

Fast forward to the sale and the sale price is $220,000 less fees (realtor and legal) of $20,000 for a net sale amount of $200,000.  If we're still at 40:60 land:building, then the proceeds of disposition are $80,000 for land and $120,000 for building.  

You report each component separately.  The building disposition is on the rental schedule.  You will see in Area E - Building dispositions for the year.  If CCA has been taken and the building is being sold at a profit, then you have to show "recapture" of the total CCA taken (which is just like rental revenue and 100% subject to tax) which will bring you back up to the original ACB.  The amount between the proceeds and the ACB is a capital gain on the building.  Profile may push the capital gain to S3.

You report the capital gain on the land on S3 section 4 Real Estate etc.

That's assuming all gains.  Losses are a different matter.  The land will have a capital loss; the building a terminal loss.  But there's a catch.  If the apportionment on sale (eg the building is now a "teardown") produces a capital gain on the land but a terminal loss on the building, this is NOT allowed.  You see, a terminal loss goes against the rental income and - like recapture - is a 100%er as in the whole loss is taken into consideration for rental income (again on the T776).  Obviously, everyone would like to have the 100% loss on the building and only 50% gain (thinking taxable) on the land.  So there are rules that - in this circumstance - the proceeds of disposition on the building are deemed to be at it's ACB or, if depreciation has been taken, at its depreciated value.  So there's neither a gain or a loss on the building.  All the remaining proceeds are put against the land.

Hope this helps.  If you have any further queries, I'll try to help.

Jo Ruelle