Renting a con dominium to your parents

My question is: Canadian-specific

QUESTION: I plan to purchase a rental condominuim and rent it to my parents.
Is the rental income from my parent's tax deductible?

david ingram replies.

First of all, I have received something like 40 of the Free questions in the last week. Few are simple, most are complex. And some new responsibilities with my children have taken away my time.

I am adding all the questioners to the list and I look back to find another question to answer when I do.

For this questioner, I think the question was - Can I write off the rental expenses. The "income" is never deductible.

The answer to that can be found at www.centa.com click on Tax Guide on the left and then click on Rental Income. You will find all sorts of rental hints and some sample tax cases including the next two:

In 1989, Virginia Maloney was turned down by Judge Mogan of the Tax Court of Canada. She had rented her house to her mother. The rent charged was not realistic with regard to the cost of and the maintenance to keep up the property. Ms Maloney had charged her mother $100 rent in 1984 with $4,600 of expenses and $1,800 rent in 1985 with $11,000 of expenses. See Special Problems below.

And in 1990, Michel-Guy Huot was also turned down for a deduction when he rented a house to his parents for less than market value. Judge Garon of the Tax Court of Canada ruled that the taxpayer "Had failed to establish that the rental expenses were incurred in order to earn income." Because of the low rent and the uncertainty of their stay, there was no "expectation of profit." (See Expectation of Profit Section at back of book for more information on this subject."


The Expectation of Profit part no longer exists if there is no personal reason behind an investment. Expectation of Profit DOES EXIST if there is a personal factor in the rental such as a time share, a partial use Whistler condo, OR a rental to a parent.

BLOWING OUR OWN HORN

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Sort of an endorsement / advertisement

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All of us forerunners in the information age used Wimsey and if anyone wants help for positioning or new hosting or, or, or - call Richard Pitt at 604-644-9265

David Ingram of the CEN-TA Group
US / Canada / Mexico tax and working Visa Specialists
108-100 Park Royal South
West Vancouver, BC, CANADA, V7T 1A2
(604) 913-9133 - Fax 913-9123 taxman@centa.com
www.centa.com www.david-ingram.com

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Tracked on Sunday, January 06 2013 @ 11:42 AM PST

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