When is a Flip Not a Flip?

[UTCVenturesLtd]

If i am renting from my corporation and fixing up a property, how long would i have to hold it before i can sell and move onto another project? I want to have capital gains and not be taxed as income. Is there a time frame that is safe to make that move? I could always rent it out to someone else and move on anyways if need be.

 

[zimnicki]

I have been told it`s 6 months, but someone correct me if i`m wrong!

 

[terri]

QUOTE (UTCVenturesLtd @ Dec 3 2008, 09:24 PM) If i am renting from my corporation and fixing up a property, how long would i have to hold it before i can sell and move onto another project? I want to have capital gains and not be taxed as income. Is there a time frame that is safe to make that move? I could always rent it out to someone else and move on anyways if need be.


I believe it comes down to being able to prove "intent". If you renovate the house, don`t live in it and don`t rent it out, then it looks like you bought it to flip, whether you hold it for 6 months, 1 yr, 2 yrs.

 

[Thomas Beyer]

QUOTE (UTCVenturesLtd @ Dec 3 2008, 08:24 PM) If i am renting from my corporation and fixing up a property, how long would i have to hold it before i can sell and move onto another project? I want to have capital gains and not be taxed as income. Is there a time frame that is safe to make that move? I could always rent it out to someone else and move on anyways if need be.
if your main business is buying, fixing up and selling it is always income and NEVER capital gain !

Capital gain is only applicable if the intention is to hold for rental income.

The timeline doesn`t matter .. the intention does !

 

[ChrisDavies]

And further to Thomas`s comment, if you create a pattern of flips that looked like capital gains at the time, the can do an audit and come back at you....

If flipping is what you want to do, then do it and be good at it!

 

[navaz]

QUOTE (UTCVenturesLtd @ Dec 3 2008, 09:24 PM) If i am renting from my corporation and fixing up a property, how long would i have to hold it before i can sell and move onto another project? I want to have capital gains and not be taxed as income. Is there a time frame that is safe to make that move? I could always rent it out to someone else and move on anyways if need be.


You have a few issues- renting from your corporation is your first issue, secondly- you intention at the time of purchase, thirdly- it is not a "how long do i have to hold issue" and most of the arguments would revolve- why did you purchase in your corporation if you intended to live in it!

 

[UTCVenturesLtd]

QUOTE (navaz @ Dec 4 2008, 08:05 PM) You have a few issues- renting from your corporation is your first issue, secondly- you intention at the time of purchase, thirdly- it is not a "how long do i have to hold issue" and most of the arguments would revolve- why did you purchase in your corporation if you intended to live in it!


I took the Quickstart home study course. The idea is to buy property, initially live in it, fix up with new medium quality flooring and increase the property value to refinance, get higher rents and buy a second property and start building a portfolio. I have no principle residence since i funded the wife`s business. "Intention" was to rent it out after living in one suite and remodelling it and renting front suite to existing renters who moved out a month later after purchase. Then idea was to finish renovating both suites to rent out... creating a time delay in getting both ready... Current potential renters are drinkers and smokers or own 4 cats... so have been thinking of selling it to the potential reno guy renter and leaving that area... (Don`t renovate will you live in the same property if you are married! A word of caution! haha) The fellow across the street once had 5 rental properties and everytime renters had excuses why the rent was not paid, he sold them off one by one til he is out of that business. Not wild about what has been coming my way so far although these two saw me fixing up the front suite when they enquired. I have yet to advertise and screen others. Commute to Calgary is causing anxiety with the wife too... with winter closing in putting more pressure on me to sell to free up cash flow to be back in Calgary before i can complete this project.

 

[navaz]

You could try and argue capital gains -but then - could you not replace the tenants

 

[Thomas Beyer]

QUOTE (navaz @ Dec 5 2008, 04:23 AM) You could try and argue capital gains -but then - could you not replace the tenants
you can ALWAYS argue .. one can also steal a coke at Safeway and likely won`t get caught !!

 

[UTCVenturesLtd]

QUOTE (navaz @ Dec 5 2008, 04:23 AM) You could try and argue capital gains -but then - could you not replace the tenants

Decisions, decisions and time will tell as it always does...
Will finish the renos and make it look even more appealing and if i cannot find good tenants, i have a option of changing the front suite into commercial as it is zoned for that being a store front on the main street in the town so i could venture into putting my own business in there as an alternative plan. I have been thinking ahead and the front is being remodelled in such a way that it could go either way. I should be completed the interior renos by the end of Feb... (Always allow 2X as much time for renos as what you think they will take.)
Chris Davies has a good idea with flips. Already putting it out there to attract some JV investors to do just that. Most properties can be holds, but flips are good to build capital fast. You make your money when you buy one at the right price. Trick is to find the right deal and move fast.

 

[ChrisDavies]

QUOTE (UTCVenturesLtd @ Dec 6 2008, 11:59 AM) Decisions, decisions and time will tell as it always does...
Will finish the renos and make it look even more appealing and if i cannot find good tenants, i have a option of changing the front suite into commercial as it is zoned for that being a store front on the main street in the town so i could venture into putting my own business in there as an alternative plan. I have been thinking ahead and the front is being remodelled in such a way that it could go either way. I should be completed the interior renos by the end of Feb... (Always allow 2X as much time for renos as what you think they will take.)
Chris Davies has a good idea with flips. Already putting it out there to attract some JV investors to do just that. Most properties can be holds, but flips are good to build capital fast. You make your money when you buy one at the right price. Trick is to find the right deal and move fast.

And accept for those ones that it`ll be taxed as income up front. I`m a fan of the saying "I like paying taxes, it means I`m making money".