Using rental duplex as security for rental triplex

My question is: Canadian-specific

QUESTION: Hi there:
I recently borrowed equity against my current owner live in rental duplex, and used it as a downpayment and purchased a triplex investment property. Would I be able to deduct 50% of the interest on the equity against my duplex rental income? Was I better off to sell the current duplex? Should I deduct my expenses (repairs etc) from rental income, what are the implication sfor future do I have to then pay capital gains tax? Do I still have to pay capital gain tax if I dont deduct expenses (repairs,... non-operational expenses)? Thank you so much.

david ingram replies:

If the loan on the duplex which you live in was used to buy a rental triplex whuich you do not live in, then 100% of the interest on the down payment loan is deductible on the T776 (rental form) you file for the triplex. 

Although the loan is registered agaisnt the duplex, it is only deductible gains tthe triplex.

goto and click on the Tax  GUIDE section in the top left hand box.

Then click on the rental section and then the capital gains section for some more ideas.  In the capital gains section pay attention to Saccamona who sold a triplex he lived in tax free as a principal residence.  If you live in the duplex, its eventual sale should be tax free based on this case.