Capital Gains question

[snowbird]

In 2009 I have sold one property for $40k more than I bought it for. I took the profit from this property (about $20k) and reinvested it in another property. I renovated the second property and may sell it for a profit of $80-$100k net profit. If I reinvest this profit in same calendar yr, do I pay capital gains on these properties?
I have created a real estate corporation. What will be the amount of capital gains?
ie $20k first property x 50% x corporate tax rate of approx 20% =$2000
2nd property $100k x 50% x 20%? =$10k
Thanks, I just joined REIN this wknd,
Jeff

 

[tonypeters]

Jeff,

The BEST advice I can give you is "consult with your accountant"!

There are MANY influencing factors when it comes to tax, so you should refrain from seeking FREE advice on this forum and seek advice from a professional. Please do not take my comments the wrong way, as they are only intended to assist you. I would hate to see you get yourself in any trouble, as CRA is NOT an entity that you want to MESS with!

Another good reason to speak with your accountant is "tax planning". Being "pro-active" can save you a BUNDLE! CRA place a LOT of focus and make decisions based on your "original intent". With this in mind, "you should ALWAYS no what your back door (exit strategy) is, the day you go in the front door". Hope this helps?



QUOTE (snowbird @ Oct 5 2009, 05:22 AM) In 2009 I have sold one property for $40k more than I bought it for. I took the profit from this property (about $20k) and reinvested it in another property. I renovated the second property and may sell it for a profit of $80-$100k net profit. If I reinvest this profit in same calendar yr, do I pay capital gains on these properties?
I have created a real estate corporation. What will be the amount of capital gains?
ie $20k first property x 50% x corporate tax rate of approx 20% =$2000
2nd property $100k x 50% x 20%? =$10k
Thanks, I just joined REIN this wknd,
Jeff

 

[snowbird]

Thanks alot Tony, very helpful. I just signed up for REIN this wknd and am a bit overwhelmed. Lookin forward to chatting again, Jeff

QUOTE (tonypeters @ Oct 5 2009, 09:17 AM) Jeff,

The BEST advice I can give you is "consult with your accountant"!

There are MANY influencing factors when it comes to tax, so you should refrain from seeking FREE advice on this forum and seek advice from a professional. Please do not take my comments the wrong way, as they are only intended to assist you. I would hate to see you get yourself in any trouble, as CRA is NOT an entity that you want to MESS with!

Another good reason to speak with your accountant is "tax planning". Being "pro-active" can save you a BUNDLE! CRA place a LOT of focus and make decisions based on your "original intent". With this in mind, "you should ALWAYS no what your back door (exit strategy) is, the day you go in the front door". Hope this helps?

 

[tonypeters]

You`re welcome Jeff. Glad to see that you are TAKING ACTION! The very BEST of luck to you!

QUOTE (snowbird @ Oct 5 2009, 09:47 AM) Thanks alot Tony, very helpful. I just signed up for REIN this wknd and am a bit overwhelmed. Lookin forward to chatting again, Jeff

 

[Thomas Beyer]

QUOTE (snowbird @ Oct 5 2009, 04:22 AM) In 2009 I have sold one property for $40k more than I bought it for. I took the profit from this property (about $20k) and reinvested it in another property. I renovated the second property and may sell it for a profit of $80-$100k net profit. If I reinvest this profit in same calendar yr, do I pay capital gains on these properties?
I have created a real estate corporation. What will be the amount of capital gains?
ie $20k first property x 50% x corporate tax rate of approx 20% =$2000
2nd property $100k x 50% x 20%? =$10k
Thanks, I just joined REIN this wknd,
Jeff
It could be argued, by CRA for example, that there is no capital gain here ! This is business income as you are flipping properties and/or reno them for a profit. Thus, your business treats the properties as "inventory" and you pay income taxes on the income.

The length of time you hold is not relevant for capital gains. The intent to hold them long term for rental income is the key characteristic to study.