If you sell or dispose of a residential property you may be able to claim the amount of interest previously disallowed by the interest limitation rules.
Taxable under the bright-line test
If you sell or dispose of a property and it is taxable under the bright-line test, you can add the amount of the interest previously disallowed by the interest limitation rules to the cost of the property to reduce the taxable gain.
If this results in a loss, it can only be deducted against other taxable gains on other land sales. It cannot be used to offset income from other sources like salaries and wages. Any excess loss must be carried forward and deducted against other land sale gains in later income years.
Taxable for other reasons
If the sale or disposal is taxable under 1 of the other land sale rules, you can claim the previously disallowed interest.
If the sale or disposal is not taxable
You cannot claim the interest previously disallowed under the interest limitation rules if the sale or disposal is not taxable.