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My question is: Canadian-specific
QUESTION: I originally purchased a condo in 1991 as my sole residence, but converted it to rental in 1996 when my girlfriend and I acquired a house in joint title. The condo stayed in my 100% ownership. In 2000 we were married and are now at a stage where it makes sense for my wife to claim as much of the rental income as possible (a mortgage of $ 50K remains; original price $ 98K and current market is around $ 145K). However, we wish to avoid capital gains or the attraction of any other levy or violation of any type of attribution rule. Can you recommend a way to achieve this? Although we would prefer a 100% transfer of the asset to her name, we are amenable to 50% - if this makes a difference.
Thank you.
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david ingram replies:
The condominium is taxable for capital gains purposes from the day you bought the second house and moved into it although you do have the option of making the condo tax free for four more years and accruing tax on your half of the house.
Your date of marriage has nothing to do with the above statement.
Section 74.1 says that if you just put half the condo in your wife's name, it is still taxable to you. If she buys it from you, it becomes taxable to her but she has to pay you for it. One suggestion could be that she trades her half or maybe a quarter of the house for your share of the condominium.
I would rather you used the condo to make your mortgage on the house deductible. You can do that by using rents to pay down the mortgage on the house and borrowing money to pay for the expenses on the condo. And, if you have the higher income, that would make sense for you.
You can find out more about this by going to www.centa.com and reading the November 2001 newsletter. The first page is about Canadians filing US tax returns (who has to file) and then there are another eleven pages about making your mortgage interest deductible.
If you are wondering why I am answering this at 5:00 AM it is because we just came back from seeing the first showing of the Lord of the Rings.
hoping this helps, I remain
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
Calls accepted from 10 AM to 10 PM 7 days a week
Res (604) 980-3578 Cell (604) 657-8451
(604) 980-0321
[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."
This from "ask an income tax and immigration and bankruptcy 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
108-100 Park Royal South
West Vancouver, BC, CANADA, V7T 1A2
(604) 980-0321 - Fax 913-9123 [email protected]
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