- Joined
- Sep 15, 2007
- Messages
- 62
Hi all,
I`ve been doing a lot of research into taxes lately (fun!) and I found some information that I wanted to share with you. Yes, I`m a bit of a geek I know, but I do enjoy exploring these amazingly grey areas in our legislation. In any case, being well versed on the topic of taxes has proven to be handy in talking to investors because nothing sounds more like a real estate expert than saying, "Well, that`s an excellent question Mr. Investor. According to CRA Interpretation Bulletin IT-218-R..." (I`m only partly kidding...).
The information I found is on the much debated and very grey area of captial gains, and it is, indeed CRA Interpretation Bulletin IT-218-R, found here in it`s entirety: http://www.cra-arc.gc.ca/E/pub/tp/it218r/it218r-e.txt
This bulletin discusses treatment of capital gains for a property. I know REIN has covered similar, if not identical information, so I apologize if this is repeat for anyone. Of particular interest is paragraph 5, which reads:
5. A taxpayer`s intention at the time of purchase of real estate is relevant
in determining whether a gain on its sale will be treated as business income
or as a capital gain. It is possible for a taxpayer to have an alternate or
secondary intention, at the time of acquiring real estate, of reselling it at
a profit if the main or primary intention is thwarted. If this secondary
intention is carried out any gain realized on the sale usually will be taxed
as business income.
This one definitely contrasted with what I thought I knew about capital gains in the past. I`ve always heard that if you hold a property for x number of years, or if you declare your intention is to hold over the long-term, you`re fine. This is a bit of a different twist on things.
In any case, it`s always a good idea to engage an experienced accountant who specializes in real estate. Much of the actual treatment of capital gains in reality is determined in the courts and by precedent case law. Just because the CRA says something doesn`t mean they can enforce it. Accountants are usually up to speed on this stuff and can provide better insight.
Just some food for thought. Enjoy and feel free to dicsuss. Cheers!
I`ve been doing a lot of research into taxes lately (fun!) and I found some information that I wanted to share with you. Yes, I`m a bit of a geek I know, but I do enjoy exploring these amazingly grey areas in our legislation. In any case, being well versed on the topic of taxes has proven to be handy in talking to investors because nothing sounds more like a real estate expert than saying, "Well, that`s an excellent question Mr. Investor. According to CRA Interpretation Bulletin IT-218-R..." (I`m only partly kidding...).
The information I found is on the much debated and very grey area of captial gains, and it is, indeed CRA Interpretation Bulletin IT-218-R, found here in it`s entirety: http://www.cra-arc.gc.ca/E/pub/tp/it218r/it218r-e.txt
This bulletin discusses treatment of capital gains for a property. I know REIN has covered similar, if not identical information, so I apologize if this is repeat for anyone. Of particular interest is paragraph 5, which reads:
5. A taxpayer`s intention at the time of purchase of real estate is relevant
in determining whether a gain on its sale will be treated as business income
or as a capital gain. It is possible for a taxpayer to have an alternate or
secondary intention, at the time of acquiring real estate, of reselling it at
a profit if the main or primary intention is thwarted. If this secondary
intention is carried out any gain realized on the sale usually will be taxed
as business income.
This one definitely contrasted with what I thought I knew about capital gains in the past. I`ve always heard that if you hold a property for x number of years, or if you declare your intention is to hold over the long-term, you`re fine. This is a bit of a different twist on things.
In any case, it`s always a good idea to engage an experienced accountant who specializes in real estate. Much of the actual treatment of capital gains in reality is determined in the courts and by precedent case law. Just because the CRA says something doesn`t mean they can enforce it. Accountants are usually up to speed on this stuff and can provide better insight.
Just some food for thought. Enjoy and feel free to dicsuss. Cheers!
