Abatement Term in an offer to purchase

[nubiwan]

Can I buy a house for $120K with a $60K abatement for proposed renovations? In short, I pay $60K for the home, and conduct the renovations with my own $60K?

The reason I ask is that I have a record of sale for $120K, not $60K, so I would hope there wuld be some tax relief in a situation were I flip the home and sell it for say $160K.

On a similar vein. What are my advantages of incorporating and paying just the 20% coporate taxes on the properties I buy amd flip?

Thanks

Tony

 

[Thomas Beyer]

QUOTE (nubiwan @ Nov 3 2009, 10:32 AM)
Can I buy a house for $120K with a $60K abatement for proposed renovations? In short, I pay $60K for the home, and conduct the renovations with my own $60K?



The reason I ask is that I have a record of sale for $120K, not $60K, so I would hope there wuld be some tax relief in a situation were I flip the home and sell it for say $160K.


yes you can .. but your adjusted cost base is 60K .. not 120K .. so you pay taxes over and above 60K (+ upgrades !)




QUOTE (nubiwan @ Nov 3 2009, 10:32 AM)
..



On a similar vein. What are my advantages of incorporating and paying just the 20% coporate taxes on the properties I buy amd flip?



..


You pay the SAME TAXES in a corporation .. why would it be lower ?



if you flip, it is BUSINESS INCOME .. not capital gains .. thus 40%+ usually !!



Only if you buy to hold with rental income is it a capital gain !



JV options: Pro`s and Con`s of LP vs. Corporation

http://myreinspace.com/public_forums/General_Discussion/61-10979-JV_vs_Limited_Partnership.html

 

[nubiwan]

Thanks Thomas,

I thought I read a while back that business tax was only 20%. Obviously, I must be mistaken.

 

[Thomas Beyer]

QUOTE (nubiwan @ Nov 3 2009, 06:28 PM)
Thanks Thomas,



I thought I read a while back that business tax was only 20%. Obviously, I must be mistaken.


true ... on active corporate income up to $400,000 .. ask an accountant !! so flipping may qualify !!



keep in mind this money is now in a corporation .. and if you take it out personally it is either

a) a dividend

b) a salary

c) a GST/HST taxable management fee



all taxable to you personally on top of it !!

 

[nubiwan]

QUOTE (ThomasBeyer @ Nov 3 2009, 10:46 PM) true ... on active corporate income up to $400,000 .. ask an accountant !! so flipping may qualify !!

keep in mind this money is now in a corporation .. and if you take it out personally it is either
a) a dividend
b) a salary
c) a GST/HST taxable management fee

all taxable to you personally on top of it !!

So the idea would be to make $40K profit on the house the corporation, pay myself a salary, which I get taxed on, but I can keep to the minimum, and reinvest my remainder on the new property.

Is there a better way to do this outside of a corporation?

If I simply bought/reno/flipped, without incorporating, then I`d get dinged the full tax amount on $40K income, correct?

Is it all as simple as that? I am guessing not.

Tks
Tony

 

[Thomas Beyer]

QUOTE (nubiwan @ Nov 4 2009, 10:16 AM) So the idea would be to make $40K profit on the house the corporation, pay myself a salary, which I get taxed on, but I can keep to the minimum, and reinvest my remainder on the new property.
..
correct .. you can re-invest profits which is now cash on you balance sheet

QUOTE (nubiwan @ Nov 4 2009, 10:16 AM) ...

Is there a better way to do this outside of a corporation?

If I simply bought/reno/flipped, without incorporating, then I`d get dinged the full tax amount on $40K income, correct?

..
outside is simpler but you may pay more taxes, yes .. but I am not a tax advisor so ask one please !

it may also be harder to get a mortgage outside the corporation ..