Advice on selling. Paying capital gains, what can I do?

[InvestagainInc]

Hi there,



We are currently selling three properties for the first time and wanted some advice on capital gains. We know that its 23% on the profit, however I want to know a few things:

• Is there anything we can do to minimize it?
• If we roll into another property can we avoid paying it?
  We used CMHC insurance and purchase plus improvements so our mortgage value is higher than what we paid. would capital gains be calculated including CMHC and the money we received for improvements? Or would it only be on the purchase price?

Any advice would be appreciated.

Thanks,

Scott

 

[Thomas Beyer]

You pay taxes on the gain from purchase price plus all improvements. CMHC fees are capitalized, then amortized over 5 years, and as such might lower your gain somewhat.



Unlike the US 1031 rollover provision in Canada you cannot roll a gain. You can only roll assets from one person or firm, to another, and shuffle the gain to the buyer, down the road. Usually the buyer is either related, or she/he gets a lower price for this liability.



You can also sell an asset with a VTB, and delay the gain.



You can also sell other assets, say stocks, that have a capital loss that same year to reduce capital gains.



You can also not sell, but increase the mortgage, and create some tax free cash.

 

[InvestagainInc]

Thanks Thomas.



So am I right with this calculation?



Lets say I bought a house for mortgage value of $100,000, put $5000 on CMHC and $20,000 on improvements totalling $125,000 that is on the mortgage. Then I sold for $150,000 after realtor fees and other selling expenses, does that mean that I would only pay 23% capital gains on the $25,000 delta?



Also, when I buy another property, can I factor in the new expenses from the new property like land transfer tax and legal fees?



Thanks for your help.

 

[Thomas Beyer]

[quote user=InvestagainInc]does that mean that I would only pay 23% capital gains on the $25,000 delta?That is correct.

[quote user=InvestagainInc]when I buy another property, can I factor in the new expenses from the new property like land transfer tax and legal fees?

You would capitalize those, and amortize over 5 years, on the next house, not the one sold.



This is not tax nor financial advise. This is an (informed?) opinion only !