How to cash out?

[Luxmal]

Hi, Everyone

I own a piece land in Saskatoon area. (90 acres, zoned for single, semi and multi home) and looking forward to cash out. Because the price paid years ago was very low, I need pay a lot money for tax if sell it. Does everyone know a better way to cash out( total or partial)?

Regards

Ben

 

[Albertritchot]

I do not know what is the original cost of the property or the anticipated selling price will get from the 90 acres.

In the absence of numbers, may I suggest one possible manoeuver?

It involves using reserves.

http://www.cra-arc.gc.ca/E/pub/tg/t4037/README.html

On page 11, the discuss the concept of claiming a reserve.

Basically, instead of taking the selling price for the 90 acres in one year only, you ask the buyer to make payments over a 5 year period.

This concept is useful when the taxable capital gains can be moved to a lower rate of tax (e.g. from the highest federal tax rate of 29% to a somewhat lower rate of 22%)

 

[Thomas Beyer]

options to reduce taxes:

a) sell an interest, say 50%
b) sell with a VTB, over say 5 years
c) lease the land for X $s/year then a balloon in year 6
d) subdivide land and sell a few smaller lots and keep a few


Get used to paying taxes when selling .. it means you made a profit .. and assuming a 44% marginal tax rate you`d pay only 22% on a capital gain !

 

[Luxmal]

QUOTE (Albertritchot @ Feb 14 2010, 11:29 PM) I do not know what is the original cost of the property or the anticipated selling price will get from the 90 acres.

In the absence of numbers, may I suggest one possible manoeuver?

It involves using reserves.

http://www.cra-arc.gc.ca/E/pub/tg/t4037/README.html

On page 11, the discuss the concept of claiming a reserve.

Basically, instead of taking the selling price for the 90 acres in one year only, you ask the buyer to make payments over a 5 year period.

This concept is useful when the taxable capital gains can be moved to a lower rate of tax (e.g. from the highest federal tax rate of 29% to a somewhat lower rate of 22%)


I will take a look . Thanks

 

[Luxmal]

QUOTE (ThomasBeyer @ Feb 14 2010, 11:44 PM) options to reduce taxes:

a) sell an interest, say 50%
b) sell with a VTB, over say 5 years
c) lease the land for X $s/year then a balloon in year 6
d) subdivide land and sell a few smaller lots and keep a few


Get used to paying taxes when selling .. it means you made a profit .. and assuming a 44% marginal tax rate you`d pay only 22% on a capital gain !


My accountant from KPMG told me that I may not qualify for the 50% capital gain rule because of my development background. That means 44% tax rate for me. Is he right?

 

[Esaum]

In fact he is right. You may be considered a professional investor and therefore this is your "Business". For that reason it would qualify for Business Income and fully taxable at 44%.

 

[Thomas Beyer]

QUOTE (Esaum @ Feb 15 2010, 09:12 AM) In fact he is right. You may be considered a professional investor and therefore this is your "Business". For that reason it would qualify for Business Income and fully taxable at 44%.
true if the intention is short term flip .. or repeated flips .. not true if intention was long term hold ... just like stocks .. if you buy and sell frequently = business income. If you own stocks and sell them once in a while it is usually a capital gain !

You bought a capital asset, hence capital gain if intention was to hold long term.

 

[Luxmal]

QUOTE (ThomasBeyer @ Feb 15 2010, 10:05 AM) true if the intention is short term flip .. or repeated flips .. not true if intention was long term hold ... just like stocks .. if you buy and sell frequently = business income. If you own stocks and sell them once in a while it is usually a capital gain !

You bought a capital asset, hence capital gain if intention was to hold long term.


Thanks Thomas.