Part II Holding Corporation for Real Estate

Hi David,
You mentioned rental income in a corporation generates the highest tax rate
in Canada....
What is that rate?
I thought the maximum tax rate for a corporation was around the 20% range,
which is pretty good and what I presently pay in my limited consulting
company.  I thought if the properties were in the corporation, the maximum
tax would be this maximum corp. tax.
Personal is closer to 35%.  Any rental income added to this will drive the
personal rate even higher... something which I am trying to avoid.
david ingram replies:  The rate is about double.  I have not calculated on
for a dozen years.  It is the same as a consulting company.  If all your
income or more than 75% came from one company, you would not be eligible for
the small business deduction either.
I see an awful lot of individuals get re-assessed by the CRA for three years
back when the CRA discovers that the corporation is a personal holding
company for inactive real estate or a personal consulting company for one
employee and one client.
A lot of sad faces.
At 02:09 AM 1/9/2006 -0800, you wrote:
>-----Original Message-----
>Sent: Saturday, January 07, 2006 9:24 PM
>To: taxman at
>Subject: Holding Corporation for Real Estate Investment?
>Hi David,
>Saw your article in Ozzie's newsletter - don't know if you respond to email
>questions.  Here goes.
>I am looking at purchasing some apartment properties in Northern Ontario -
>maybe up to $2M.  I live in Vancouver, BC.  I work for a living - part-time
>as a consultant under my own limited company ($6-7KK/month income, claim
>most expenses through this), and part-time as an employee for BCIT
>($3K/month income).
>The properties will be generating positive cash - therefore no losses from
>them.  Expect to hold them for 5 years+ or so.  Not for short term
>Should I purchase these in my personal name, under my limited company which
>I normally do consulting (don't mind mixing things up if there is an
>advantage),  or open a new limited company strictly for real estate
>Any advice or articles you can point me to?
>david ingram replies:
>Owning rental property in a corporation generates the highest tax rate in
>Canada because it is not considered active business.  Mixing it with a
>consulting business could leave you liable to higher income there as well
>the rental gross exceeds your consulting gross.
>Of the top of my head, I suggest that you keep the properties in your own
>name and buy good insurance policies to cover public liability.
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