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QUESTION:
We converted a principle residence to a revenue property (100%) and upon
sale, we are advised by CCRA that the gain/loss calculation on sale must
include information from the period when the property was the principle
residence.
What we perceive to be a loss on sale (due to downward changes in real
estate market values) is being converted to a gain on sale based on this
prior information.
What is CEN-TA's interpretation?
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david ingram replies:
Well, the form T2091 and the legislation has a big flaw in it which is working against you.
Everybody but the CCRA seems to realize that property goes up and down and that it does not go up on a straight line basis.
However, the CCRA and form T2091 assume that if a property went up $120,000 in a twenty year period, it must have gone up exactly $500 a month even though the percentages do not make sense and it may have gone down for three years at a time twice.
So in this case if bought it for $100,000 and moved out when it was worth $240,000 and sold it for $220,000, you would have made $120,000. If it was rented out for 60 or the 240 months you owned it, the tax office would say you owed tax on $30,000 (60 x's $500 a month) even though you actually lost $20,000 during the rental time.
Unfair to you, yes.
On the other hand another client bought a house for $481,000 ($381,000 plus $100,000 of immediate improvements) in 1981 and when he was transferred to Toronto, it was worth $200,000 in 1985. He kept it and rented it out and when he finally sold it last year for $475,000, there was no tax even though it had gone back up $275,000.
Wish I could help but they got you square, even if not fair.
David Ingram's US/Canada Services
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
4466 Prospect Road
North Vancouver, BC, CANADA, V7N 3L7
Res (604) 980-3578 Cell (604) 657-8451
(604) 980-0321
New email to [email protected]
www.centa.com www.david-ingram.com
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 & the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent financial, or real estate planner or advisor & appropriately qualified legal practitioner, tax or immigration specialist in connection with personal or business affairs such as at www.centa.com. If you forward this message, this disclaimer must be included."
Be ALERT, the world needs more "lerts"
This from "ask an income tax and immigration expert" from www.centa.com or www.jurock.com or www.featureweb.com. Canadian David Ingram deals daily with tax returns dealing with expatriate:
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another similar question will be as we lump them.
You may find more answers at www.centa.com
David Ingram of the CEN-TA REALTY Group
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
(604) 980-0321 - Fax 913-9123 [email protected]
www.centa.com www.david-ingram.com
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