Selling Rental Property - international non-resident cross border income tax help estate family trust assistance expert pre

Selling Rental Property

 Hi Dave
You advised recently that deduction of rental property mortage interest(s) is Kosher only if you realistically expect to realise a positive cash flow from rental income within a reasonable span of time.

With the cost of an average house or condo nowadays, a mortgage would have to be payed down alot for the rent to actually provide a surplus.

What if it never produces a positive cash flow and you just sell it? Will the years of claimed deductions come into question?

What if you move into it upon retirement? Will you be accused of never intending to realise a positive cash flow?

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david ingram replies:

If you bought an apartment to move into in five years and the projected rental cash flow upon purchase showed negative every year, you would not be allowed to claim the rental loss in the interim.

If you bought a rental profit to movie into in 15 years and it projected rental losses for seven years and a rental profit for eight, you would be allowed the rental losses even if the actual projection became wrong and you actually lost money for 11 years.

If you bought an apartment as an investment to sell at a profit and rent it out in the meantime as a method of helping with the payments, any losses are NOT deductible because you did not buy it to rent but to sell for a profit at a specific time.In addition, any profits on the sale would be subject to straight income taxes, not capital gains.

If you bought an apartment to rent out for ever and were forced to sell in 3 or 7 or 10 years because of outside circumstances, the rental; losses would be deductible  and any profit on the sale would be taxed at Capital Gains rates.

Obviously, there is something in  between.  However, 'Anything' you buy for personal use or eventual personal use is subject to restrictions on the amount of rental loss you can claim as a deduction against other income.

Goto www.centa.com and read the rental income section in the TAX GUIDE in the top left hand box.

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david ingram wrote:
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Disclaimer:  This question has been answered without detailed information or consultation and is to be regarded only as general comment.   Nothing in this message is or should be construed as advice in any particular circumstances. No contract exists between the reader and the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent and appropriately qualified legal practitioner or tax specialist for expert help, assistance, preparation, or consultation  in connection with personal or business affairs such as at www.centa.com. If you forward this message, this disclaimer must be included."
 
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David Ingram gives expert income tax & immigration help to non-resident Americans & Canadians from New York to California to Mexico  family, estate, income trust trusts Cross border, dual citizen - out of country investments are all handled with competence & authority.
 
Phone consultations are $400 for 15 minutes to 50 minutes (professional hour). Please note that GST is added if product remains in Canada or a phone consultation is in Canada.
 
This is not intended to be definitive but in general I am quoting $800 to $2,800 for a dual country tax return.
 
$800 would be one T4 slip one W2 slip one or two interest slips and you lived in one country only - no self employment or rentals or capital gains - you did not move into or out of the country in this year.
 
$1,000 would be the same with one rental
 
$1,200 would be the same with one business no rental
 
$1,200 would be the minimum with a move in or out of the country. These are complicated because of the back and forth foreign tax credits. - The IRS says a foreign tax credit takes 1 hour and 53 minutes.
 
$1,500 would be the minimum with a rental or two in the country you do not live in or a rental and a business and foreign tax credits  no move in or out

$1,600 would be for two people with income from two countries

$2,800 would be all of the above and you moved in and out of the country.
 
This is just a guideline for US / Canadian returns
 
We will still prepare Canadian only (lives in Canada, no US connection period) with two or three slips and no capital gains, etc. for $150.00 up.
 
With a Rental for $350
 
A Business for $350 - Rental and business likely $450
And an American only (lives in the US with no Canadian income or filing period) with about the same things in the same range with a little bit more if there is a state return.
 
Moving in or out of the country or part year earnings in the US will ALWAYS be $800 and up.
 
TDF 90-22.1 forms are $50 for the first and $25.00 each after that when part of a tax return.
 
8891 forms are generally $50.00 to $100.00 each.
 
18 RRSPs would be $900.00 - (maybe amalgamate a couple)
 
Capital gains *sales)  are likely $50.00 for the first and $20.00 each after that.
 
Just a guideline not etched in stone. 
 
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