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My question is: Canadian-specific
QUESTION: My wife owned a condo in Langley before we were married and it remains in her name. We no longer live in the condo, but still own it (still in her name)and have been renting it to earn income and help pay the mortgage. We have been including the rental income on her tax return and accordingly deducting the expenses on her tax return. The condo is now a "leaky condo" and we are facing a considerable expense >$30k to repair. My wife is no longer working and has chosen to remain at home with our children, therefore her income is very low relative to mine. I would like to know if we can transfer the condo into my name and therefore deduct the loss from my (higher) income to reduce my total tax bill? I hope you can offer some advice.
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david lngram replies
You will not like the answer. If your wife rented the condo BEFORE there was any indication of the leaky syndrome, she could write off the repairs as repairs. However, even if you bought it from her now properly under Section 74.1 of the act, YOU could NOT write off the repairs because you knew about them before you bought it and presumably paid less because of the knowledge of the $30,000 you were going to have to put out for repairs.
If you buy the unit from your wife, the repairs are not repairs but improvements and get added to the ACB (adjusted cost base)
THEN, the really bad news is that when you sell it for a profit in the future you will pay a higher tax then your wife would.
Don't do it, no matter how appealing it seems. The CCRA is having a field day turning down repairs for leaky condos because so many people go the bright idea that they would move out and rent their condo to write off the repairs. DOES not work legally if the CCRA gets wind of it. Unfortunately, if they catch one person in a building, they just go through all the tax returns for the other owners in the same building.
Hope this helps.
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