My question is: Canadian-specific QUESTION: I am selling my business and have decided to carry some vendor financing. The price is 175,000 the purchaser is putting 50,000 down and I will carry the balance with a demand loan for six to ten years??? My question is do I pay capital gains on the 50,000 or do I have to claim the entire amount even though I wont recieve it for some time. Secondly if I have to pay up front do the payments I will recieve during the next few years become deductions. I should hope they are not taxed again. Thank-you Tom Hastie --------------------------------------------------------------------------- david ingram replies: If you sell the business as a corporation or an active farm, you are entitled to up to $500,000 capital gains tax free which would mean none of it is taxable. If you have already used up the $500,000, the capital gains tax would be paid on the profit proportion of the $50,000 and then the balance can be spread over 5 years even if you carry the paper for 10 or even 25 years. Let's pretend that the cost price of the business was $75,000 and you have made exactly $100,000 profit. In the first year you would pay tax on $50,000/$175,000 x's $100,000. In each of the next four years, you would pay tax on ($125,000/4)/$175,000 x's $100,000. Hope this helps. In the US, the tax would be spread over the life of the contract and you would pay tax on the proportion of the capital gains to the amount of principal paid down every year. 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 Dundee Wealth Management and I, David Ingram 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 <http://www.600am.com/> Local calls are taken at (604) 280-0600 and Long Distance calls are taken at 1( 866) 778-0600 I do not know how far the LD line reaches. ========================================= This from "ask an income tax and immigration expert" from www.centa.com <http://www.centa.com/> or www.jurock.com <http://www.jurock.com/> or www.featureweb.com <http://www.featureweb.com/> . 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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 in connection with personal or business affairs such as at www.centa.com <http://www.centa.com> . If you forward this message, this disclaimer must be included." Be ALERT, the world needs more "lerts" ============================== Ask a cross-border International real estate rental mutual funds immigration non-resident income tax expert - David Ingram 's CE-NTA Services in North Vancouver BC Canada on It's Your Money CKBD AM600 Fred Snyder's Radio Show --- Outgoing mail is certified Virus Free. Checked by AVG anti-virus system (http://www.grisoft.com). Version: 6.0.802 / Virus Database: 545 - Release Date: 11/26/04
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