I am a 23 year old with a job near For Mcmurray working on shift. I live in calgary but am not home a lot. I was wondering what the laws are preventing me from buying a house, living in it for six months then moving out and renting it out? Is this illegal? Could i just later sell the house back to my own company? What is the minimum stay I would need? In theory could i just keep doing this every six months (if that is the minimum time)?
Minimum Stay In Personal Residence
- Thread starter arroy
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Hi,
It`s not illigal to rent your house at any time but if you want personal residence status for tax purposes I think time frame is around 2 years. Unless your moving due to job relocation otherwise the tax man will classify you as income.
Hope this helps, J.C.
It`s not illigal to rent your house at any time but if you want personal residence status for tax purposes I think time frame is around 2 years. Unless your moving due to job relocation otherwise the tax man will classify you as income.
Hope this helps, J.C.
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QUOTE (arroy @ Oct 13 2007, 01:01 PM) I am a 23 year old with a job near For Mcmurray working on shift. I live in calgary but am not home a lot. I was wondering what the laws are preventing me from buying a house, living in it for six months then moving out and renting it out? Is this illegal? Could i just later sell the house back to my own company? What is the minimum stay I would need? In theory could i just keep doing this every six months (if that is the minimum time)?
Good evening,
While the Income Tax Act does not specify a time frame for living in a "principle residence" I`m not sure what the benefit of selling it to your company will be. It is well accepted from a tax perspective that someone who for example uses a cottage for a couple of weeks per year on a regular basis would qualify to use the principle residence exemption, thus the required time frame can be short. There are a variety of other rules related to the principle residence exemption that may restrict or prevent you from getting too carried away. As a general comment, the principle residence exemption is not available for investment property. Clearly different interpretations come into play here. I highly recommend talking further to your accountant as to what you can and cannot accomplish.
I don`t believe that there`s anything illegal about your proposed plan. I doubt if it provides the tax benefits that you may be thinking of though.
On the positive side, in my mind you have the right idea of exploring what can or cannot be done with the rules - this is the beginning of creative tax planning, and more importantly you ask before you begin executing the plan.
Warm regards...
George
Good evening,
While the Income Tax Act does not specify a time frame for living in a "principle residence" I`m not sure what the benefit of selling it to your company will be. It is well accepted from a tax perspective that someone who for example uses a cottage for a couple of weeks per year on a regular basis would qualify to use the principle residence exemption, thus the required time frame can be short. There are a variety of other rules related to the principle residence exemption that may restrict or prevent you from getting too carried away. As a general comment, the principle residence exemption is not available for investment property. Clearly different interpretations come into play here. I highly recommend talking further to your accountant as to what you can and cannot accomplish.
I don`t believe that there`s anything illegal about your proposed plan. I doubt if it provides the tax benefits that you may be thinking of though.
On the positive side, in my mind you have the right idea of exploring what can or cannot be done with the rules - this is the beginning of creative tax planning, and more importantly you ask before you begin executing the plan.
Warm regards...
George
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I deal with a large accounting firm and I asked the tax specialist about minimum times. He said that there is not any thing written in stone but it is the intent that CCRA would look at. People get transferred or what ever all the time. If the government thinks you are moving to make money on your house they will want you to share with them. Not time but intent is the criteria.
From my loose knowledge of the subject: IF YOU flip it quickly, while it is rented or you are living in it, there is a great chance CRA will look at it as income vs. capital gains and you will be taxed on the gains at your marginal rate (bad). If you sell it and there is a good reason like moving for a new job , then as a principal residence, it will be tax free. They look at what you do for a living(realter, contractor) the underlying reason for buying and selling, when was the last time you sold a property , there is no time frame specified. I believe the 2 year rule is for income vs capital gains.
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If I am not mistaken I believe once you rent it out it becomes a income property and is
considered as such if rented at time of sale. To be considered a primary residentance
you would have to move back in for a period of time prior to the sale. That is where the
question of "how long" applies and after being a income property may be looked at closer
by the tax man at time of sale.
greg
considered as such if rented at time of sale. To be considered a primary residentance
you would have to move back in for a period of time prior to the sale. That is where the
question of "how long" applies and after being a income property may be looked at closer
by the tax man at time of sale.
greg
- Joined
- Sep 29, 2007
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- 130
QUOTE (3IOH22A @ Nov 11 2007, 10:17 AM) If I am not mistaken I believe once you rent it out it becomes a income property and is
considered as such if rented at time of sale. To be considered a primary residentance
you would have to move back in for a period of time prior to the sale. That is where the
question of "how long" applies and after being a income property may be looked at closer
by the tax man at time of sale.
greg
Good afternoon,
The Income Tax Act provides for a 4 year period where a rental property may still be considered a principle residence provided certain conditions are met including that it was being legitimately used as a principle residence before the rental period began.
The "2 year rule" does not exist as anything specific. Rather, it may be more thought of as a guideline that someone believes demonstrates the intention of the taxpayer and thus whether or not the principle residence exemption applies and if it doesn`t, whether the profits earned should be taxed on account of income or capital. This holding period though is just one of the factors that is weighed in determining the answer specific to the facts of the particular situation.
Warm regards...
George
considered as such if rented at time of sale. To be considered a primary residentance
you would have to move back in for a period of time prior to the sale. That is where the
question of "how long" applies and after being a income property may be looked at closer
by the tax man at time of sale.
greg
Good afternoon,
The Income Tax Act provides for a 4 year period where a rental property may still be considered a principle residence provided certain conditions are met including that it was being legitimately used as a principle residence before the rental period began.
The "2 year rule" does not exist as anything specific. Rather, it may be more thought of as a guideline that someone believes demonstrates the intention of the taxpayer and thus whether or not the principle residence exemption applies and if it doesn`t, whether the profits earned should be taxed on account of income or capital. This holding period though is just one of the factors that is weighed in determining the answer specific to the facts of the particular situation.
Warm regards...
George