Does CRA apply the reasonable expectation of profit test to deny my rental losses?

CRA can, though the modern approach is somewhat broader than the traditional "reasonable expectation of profit" label suggests. Rather than a strict formula, the analysis today looks more at whether your rental activity is a genuine commercial undertaking or something closer to a personal or hobby-like arrangement, considering things like whether you're charging rent at or near fair market rates, whether you're managing the property in a business-like way, and whether losses look like a temporary, reasonable startup phase versus a permanent, structural feature of how the property is run.

A new rental property that loses money for a year or two while getting established is generally treated differently than one that has quietly lost money indefinitely with no real path to profitability - the second scenario is far more likely to draw scrutiny. Because this is a fact-dependent inquiry rather than a fixed test with a clear pass or fail line, there's no way to guarantee in advance that a particular year's loss will be accepted; the strength of your position comes from how the rental is actually run, priced, and documented over time, not from any single factor in isolation.