Can I still claim a terminal loss on a rental property sold to a family member below market value?

Not necessarily, and this is an important trap to know about. Selling a rental property to a family member below its actual market value doesn't let you manufacture an artificial terminal loss simply by choosing a low sale price. Because you and a family member generally aren't dealing with each other at arm's length, CRA can substitute the property's fair market value for the actual, below-market sale price you used, which can eliminate or reduce the "loss" you were counting on.

This matters because a terminal loss depends on comparing the sale proceeds against the property's remaining undepreciated capital cost - if CRA replaces your artificially low sale price with a proper fair market value figure instead, the numbers may no longer show a loss at all, or may show a much smaller one than expected. This rule exists precisely because non-arm's length transactions between family members create an obvious opportunity to manufacture tax outcomes that wouldn't occur in a genuine market sale between unrelated parties. If you're considering a below-market sale to a relative, getting a proper, defensible fair market value assessment done in advance is essential to understanding what the real tax consequences will actually be.