Converting RE to Corporation

[CollegeRentals]

I`m must say as a new member to the REIN Forums I`ve been quite impressed with the level of intellegent feedback. I`m hoping that you can assist in providing me with or guiding me to the same level of feedback.

I recently closed on my first two investment properties in Hamilton at the end of July and will be closing sale on my third purchase in Brantford (a JV) in January. As I become further entrenched in RE Investing I`ve quickly realized the best option to minimize my income and/or capital gains tax is by converting my real estate into a Corporation.

I`m hoping that someone might have a brief background or be able to provide a link to some helpgul information on the process of starting the Corporation, converting the properties into the Corporation`s name, converting the mortgages (if necessary), and the possible tax benefits of doing so.

Thanks again for reading this and I look forward to your responses.


Cheers,
Cameron

 

[ChrisDavies]

Hi Cameron,

I`m sure others will mention this in more detail, but the savings in a corporation are very small and/or less than by holding personally.

I hold my properties personally, preferring a capital gains tax rate to even a corporate tax rate.

 

[Albertritchot]

Hello Cameron,

I would agree with Chris that making use of a corporation for buying rental properties is likely not the most tax efficient structure for now.

Because rental income is considered "passive income" in a corporation, the level of taxes to be paid is much higher than if you pay taxes personally.

The only circumstance where a corporation might be beneficial (for tax reasons) is if you buy property intending to sell it in a short period (basically buying and selling property as a business).

Hope this helps.


Albert Ritchot CGA
www.albertritchotcga.com

 

[Thomas Beyer]

QUOTE (CollegeRentals @ Nov 25 2009, 01:54 PM)
... As I become further entrenched in RE Investing I've quickly realized the best option to minimize my income and/or capital gains tax is by converting my real estate into a Corporation.


why ?




QUOTE (CollegeRentals @ Nov 25 2009, 01:54 PM)
...



I'm hoping that someone might have a brief background or be able to provide a link to some helpgul information on the process of starting the Corporation, converting the properties into the Corporation's name, converting the mortgages (if necessary), and the possible tax benefits of doing so.


Pro`s and Con`s of creating a company for real estate holding:

http://myreinspace.com/public_forums/Real_Estate_Discussion/62-10292-54272-To_create_a_company_or_not.html#54272



converting aka transferring aka selling from one legal owner to another has potential tax consequences and banks have to approve a mortgage assumption .. many do it .. some don't ..

 

[Nir]

I thought JV`s and/or apartment buildings actually have advantages when done under a corporation, more significant (advantage) than non-JV purchase of a residential zoned property!(?) Also, is purchasing under a corp not REQUIRED by (some) banks in the case of apt. buildings? TX.