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My question is: Canadian-specific
QUESTION: We own a half duplex since 1992, original purchase price of 210k. Mortgage paid off, with a readvanceable mortgage available up to 200k of which we have borrowed 70k for purchasing other rental properties. House value today is approximately 350k. We would like to purchase/build a new house for ourselves while keeping the duplex for a rental. Since the mortgage is paid off we won't have any mortgage interest expense to claim. How can we borrow against the equity of the duplex in order to have a write off against any rental income we earn on the duplex?? We can get the 130k from the bank with the readvanceable mortgage (or more $$ with an appraisal etc, the more money I can get out of it to use for a new house the better!!) but I want the write off. How can we make the loan for investment if it is for the new house? Another accountant said we could borrow up to the original purchase price of the house (210k) and write it off against the rental income on the duplex.
This didn't sound right to me and I wanted a second opinion!! I prefer to keep the duplex as it would make a good rental property with a suite upstairs(approx $1100 rent monthly) and downstairs ($650 monthly rent).Please advise!!
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david ingram replies:
This is a good question for the Sunday morning radio show and you should likely come out for one of the Thursday Evening Seminars given by Fred Snyder, host of the Sunday Morning show (details below).
Your accountant is very wrong. You can NOT borrow any money against the rental to use for another personal mortgage because the purpose of/for the loan was personal, not business.
You can use the principals in the November 2001 Newsletter at www.centa.com to make the mortgage deductible over time or you could borrow money to buy your husband's half of the duplex out, and he could use that money as the down payment on the new house. Then, he could decide to buy the whole thing from you and use the new house as security to buy the whole duplex from you and then all the mortgage would be deductible.
Then you could decide to buy half back and you would return yourselves to the original position with no capital gains tax IF?
This all has to be done within 30 days to cancel any capital gains tax liability on the sales between you.
This follows the premise of the Supreme court of Canada John Singleton case and should work fine.
Note that the individual sales do NOT need to be registered at the land titles office to be a legal sale.
Answers to this and other similar questions can be obtained free on Air every Sunday morning.
Every Sunday at 9:00 AM on 600AM in Vancouver, Fred Snyder of Cartier Partners and I will be hosting an INFOMERCIAL but LIVE talk show called "ITS YOUR MONEY"
Those outside of the Lower Mainland will be able to listen on the internet at
www.600AM.com
Local phone calls to (604) 280-0600 - Long distance calls to 1-866-778-0600.
Old shows are archived at the site.
Fred Snyder and I are giving free seminars on making your CANADIAN mortgage interest tax deductible at our new office at
1764 West 7th
Vancouver.
This is in the Spence Diamond Building at the corner of 7th and Burrard
and is very easy to find.
When: Just about " Every" Thursday Night
Time: 7 to 9 PM
RSVP: phone (604) 731-8900 to reserve (limited to 15 people)
david ingram
David Ingram's US/Canada Services
US/Canada/Mexico Tax Immigration & working Visa Specialists
US / Canada Real Estate Specialists
4466 Prospect Road (Personal residence by appointment only please)
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
Bus (604) 980-0321 Fax (604) 980- 0325
davidingram at shaw.ca 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.
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