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QUESTION: I bought a house last year (that has gone up in value by almost $200,000 and am living in the basement (as my primary residence) and renting the top two floors. I am getting married next year and would like to know what makes more financial sense in the long run: move upstairs and rent out the basement, or sell the house pay the capital gains and buy a condo to live in and a condo to rent.
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david ingram replies:
If you bought your house to live in and the rental is a mortgage helper, in my opinion there is no capital gains tax on the sale.
In 1986, Fedel Saccomanno won the sale of his home as a tax free capital gain as his principal residence. He had bought a triplex with two units rented out, and lived in the third unit with his wife on weekends when he was not teaching at the University of Waterloo. When he did not get tenure at Waterloo, and sold the property, DNR tried to tax two-thirds of the profits. Judge Taylor ruled that the entire triplex was tax free, giving credence to my claim in my Investment Guide. In the Investment Guide, I suggest that people with duplexes and triplexes should claim the whole building tax free in spite of the fact that Bulletins IT 120R2 and R3 stated that half a duplex and two thirds of a triplex would be taxable.
Whether you should sell it and buy two condos is more a matter of lifestyle, then economics.
In general, I would think that moving upstairs and renting rthe basement would be the best financial move but only time will tell. Two condos in the right location can become worth ten times the value of a house in the wrong place.
However, 93 94 and 95 were notable because any little dinky single famile house in Surrey went up $50,000 while well-located condos in Yaletown all went down $50,000 each.
Before you jump, you and your wife to be should sit down with someone like me (I do that for a living) and explore the possibilities.
David Ingram's US/Canada Services
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