QUESTION: Hi, I hope you can help me here. I am still having to do my 2003 taxes and still having a hard to trying to sort through the shoebox. I am a single mom who bought a residential property for 153,000 in Feb and put in a suite downstairs. I started renting it out for $700 in Oct. I spent approx 10,000 in putting the suite together. In August 2004 I was at a neighbourhood picnic and I had a family asking me if I would be interested in selling my place. I accept their offer and bought myself a side by side duplex and converted it into a 4 plex. I living in 1/4. Question 1. for 2003 tax what is all deductible? Would the reno for the downstairs suite be a capital or an expense for 2003? Would it mean I would have a loss because I only rented it out for a few months in 2003. Am I able to carry the loss for the next yr? Or is it just added to my selling price even though it's my principal residence. Question 2. Since living in my new principal residence 4 plex I am not enjoying living with this many people around me and having tenants this close. It has a good return but don't know if I can put up with this much longer. I am considering separating the title and selling one half. What would I be into for taxes or would it be capital Gains tax free. A note to all superstitious people especially the chinese. I live on a 1374 side and the other side is 1378. To make a long story short I couldn't move into 1378 right away and decided to stay on 1374 and not pack up again especially with 2 kids. 1374 has brought me nothing but bad luck. My last house I sold had an address of 398883. I more than double my purchase price. Plus had a really nice hassle free tenant in it. I will never buy another house with 4's in it. 88888's are the way to go. Look forward to your response Thanks --------------------------------------------- david ingram replies: For 2003, the reno is an addition to the cost of the house. It is not deductible against current income. You would file a T1 return with a T776 for the rental income. The T776 as a column for personal portions of expenses when you are renting out a suite or half of a duplex. Be sure to claim all of the interest for any money borrowed to put the suite in. Although it is easy to suggest that the house is tax free as a principal residence, your actions seem to suggest that maybe you were buying and fixing up to sell. Accepting an unsolicited offer does NOT in itself, make it tax free. It means that you sold it because you saw a profit and not because the house did not fit, was in the wrong area, etc. Following up with a duplex converted to a fourplex is more indication of a venture in the nature of trade. Your suggestion that you are considering selling have of the four-plex because you do not like the people around you does not make a reason for capital gains treatment on the first house either. Selling half of the fourplex and staying in the same building with people around you sounds like an excuse to sell for a profit. I would not recommend that you split the fourplex because it is setting a pattern. In general, however, the sale of your first house should be capital gains tax free if you built the suite as a mortgage helper and even the sale of a duplex or triplex can be tax free if there is a bona fide reason to sell a principal residence. My understanding of the policy of the CRA is that anything sold in less than 2 years is subject to scrutiny. Goto www.centa.com, click on the Tax Guide in the top left corner and read the Capital Gains section a coupe of times. Pay attention to the Sacomanno Case where he sold a triplex tax free even though the tax office tried to tax him. Good luck. 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, I, david ingram am a permanent guest on Fred Snyder of Dundee Wealth Managers' 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/> Call (604) 280-0600 to have your question answered. BC listeners can also call 1-866-778-0600. Callers to the show and questioners on this board can also attend the Thursday Night seminars on finance and making your Canadian Mortgage Interest deductible. 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