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borrow or use own money for down payment on investment property.

My question is: Canadian-specific

QUESTION: I'm about to purchase an investment property with a friend. I need $20,000
for the downpayment (my share). I do have $20,000 cash for downpayment.
Should I use my money or use a line of credit to borrow $20,000 for tax write off purpose?

david ingram replies:

Ah, that they should all be this easy.

If you have plans to buy a car (non deductible0 or take a vacation to Europe (non-deductible) or hagve an outstanding non-deductible mortgage at the moment, you shoul duse the $20,000 you have to buy the car, pay down the non-deductible mortgage or take the European vacation.

If you can NOT forsee the need for the $20,000 or any part for personal expenses in the next coup,le of years, save interest and use it fro the down payment.

In the meantime, go to and read the November 2001 Newsletter in teh top left hand box.  The first pag is on which Canadians have to file a US tax retuirn and then there are 7 pages of how to make interst deductible.  Fred Snyder at has a calculator for the project as well and does free seminars every Thursday at noon and 7 PM at his office at 1764 West Seventh in Vancouver (starting again in September with one big one in July or August date to be determined).  Call 604-731-8900 to get more details. �
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Loaning money to parents for retirement home

My question is: Canadian-specific

QUESTION: My parents are looking at purchasing in the Okanagan.
They have a condo paid for in Abbotsford worth
approximately 220 000.     What they would like in the
Okanagan is out of their price range, and they don't want
to assume more debt..

I own a house in Abbotsford, worth approx. 440,000 with
300k in equity..

If I took an equity line to help them purchase their new
property could I make the interest and equity payments
tax deductible,  eg...100,000 equity loan at 550$ a
month/6k per year in payments..  Roughly what percent
could I expect as a tax return, I make 74 000 a year..?

Does this sound like a feasible option which would
accomodate their needs and allow them to purchase a
freehold property rather than a modular home....I think
this would help keep their equity and act as an investment
vehicle for me upon sale.. Am I correct....


david ingram replies:

An admirable deed but not tax deductible.

Interest on a capital asset, (vacant land, gold, non-dividend bearing stock, a summer cottage, your parent's house, etc. is NOT deductible on a year to year basis although it can sometimes be added to the ACB (adjusted Cost Base) of the asset for capital gains purposes. (not always - just sometimes - NEVER for gold, silver, summer cabin, etc - sometimes for vacant land).

If you had other investments like a mutual fund, etc, you could cash in the mutual fund, pay for the property in the Okanagan and then borrow money on your house to buy back the mutual fund and the interest would be deductible but interest on an investment in your parent's house just does not make it.

Goto and read the November 2001 newsletter in the top left hand corner for more info.  Buying and reading Fraser Smith's book, the Smith Manouvre wouold also help you understand the process.
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moving into pre-build condo and then moving back to original house


I would appreciate your advice on our dilemma: About two years ago, my wife and I bought a pre-sale condo in downtown Vancouver with the view to sell our house and move to the condo on completion. The completion is expected to be just over a month from now. The problem is that we haven’t been able to sell our house (that we listed 4 months ago) at the price we (and our realtor) believe is right. We have a mortgage offer to close the condo but cannot afford to keep both properties for too long. We would be grateful if you could kindly let us know the tax consequence of each of the following situations:
1. Situation A: We move to the condo and keep the house listed until we sell it. How long do we have to sell before we incur a capital gain tax on the difference between our house’s fair market value at the time we change our principal residence to the condo and the date we sell the house?  How is the fair market value determined? Is it the price at which we have listed, or a different price?
2. Situation B: We move to the condo and keep the house listed but realize after a while that we are still unable to sell it at the listed price. We then sell the condo and move back to the house. Do we have to pay capital gain tax on our gain in selling the condo?


david ingram replies:

You are caught in a classic bind of having two homes at the same time.   In a falling market it is devestating to a prson's finances.  In today's market , it is only mildly aggravating.  But watch out and be careful.  It can change overnight.

I do not know the figures for June but in may, the average time a home was on the marlet in Vancouver was just 37 days.  If yours has been for sale for 120 days, it would seem to be over priced.  You should have an open house for realtors and get them to leave their business card wuith the price they think it should sell for.

1.    .In situatioon one above, if the house is empty for sale and it sells in a couple of months, there jjust would nto be a capital gains problem.  If it took a year and real estate went up 4% this year, the tendency of the CRA would be to want to tax you on the perceived increase.

2.   In 2 above, you wouold be taxable on the capital gain on the condo.  NO Question.

My question is: Canadian-specific

If we buy a fixer-upper to renovate and flip without renting it out what are the allowable expenses for deductions?

____________________________________________________________________ david ingram replies:  
In general anything you spend to do the fixing is a deduction from the final sale profit.  This would include but is not limited to:  

materials, subcontractors, legal, accounting, real estate commissions, surveyors, appraisals, interest on the mortgage, interest on a building loan, interest on material loans (maybe because you used a credit card to buy), truck expenses to get supplies and transport tools, afvertising, utilities, photography, landscaping, trash removal, dumping fees, building permits, architects fees, engineering fees, home inspection fees, insurance, helpers, etc.

 Remember that any profit is taxable at straight income rates on line 135.  Flipping or renovating does NOT create capital gains tax.  The following older Questions will explain that a bit.  
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Immigrating to the US

I currently live in Van.BC and am a Canadian citizen.  My father married an American 32 years ago but I believe still maintains his Canadian citizenship. Although I have a 2 year Merchandising Diploma, no other post secondary education.  I held my real estate licence for 10 years and for the last 5 have worked for a real estate developer in their Customer Relations Department.  I would like to to move to XXXXXXXXXXXX, South Carolina and work for the Developer,XXXXXX Properties, the Developer of this XXXXXXXXXXX Lake project.  I'm trying to find a way to get a working visa (or anything) in order to work and live there.  Are you able to help or advise me.

Thank you.

david ingram replies:

I found an American Version of the company and some indication that they are the same.  If so, and if you are a manager or supervisor, they can transfer you south under a L1 Visa if you have worked for the Canadian arm for one year in the last three years.. They can NOT transfer you as a mere sales person. 

If it is just a co-incidence and you are not or have not worked for the Canadian Arm, they would have to get you an H1 Visa which is an unlikely issue for a realtor.

If your father wants to take out his American Citizenship, he can sponsor you.  He may have already done so because he can do so withouot losing his Canadian citizenship (like Wayne Gretzky)

And last, but not least, it might be easier to find an American to marry.

Goto and read the 'Entering the USA' section in the second box down on the right hand side.
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Hydrogen generators for cars

General News Hi David,

XXXX suggested I jot you a note about a hydrogen generator I'm beginning to market in B.C. Perfect for the Caddie fleet. I've ordered one for the VW, one for xxxx's car, and one for the motorhome. A remarkable product, very timely. The website is . Would welcome your thoughts.

david ingram replies:

I notice that the Supplemental site has several different sites.

I have not being following this topic very closely but notice a Canadian product with one size only at

This is a tax (and finance newsletter) - and saving 20% on gas mileabge qualifies I think.

Does anyone out there in CEN-TAPEDE land have any experience or knowledge about on board hydrogen generators for cars and trucks and motorhomes.

a 20% gas saving would be significant today.
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Buying Property in the UK

Hi David,

I am a Canadian citizen and I'm considering the prospect of buying a house in the English countryside.   Ideally, I would like to be able to fix it up and then climb the property ladder over there.  Would I need to use both a Canadian Tax lawyer and a UK Tax lawyer or just a UK tax lawyer?   Would I need to pay taxes on any profits made from selling the house in both Canada and the UK?   The plan is to put all / any profit from selling the first house into the second house and hopefully after 3 houses keeping the final house.

I've been to the bank here in Canada and have been told that I can get a credit line for the amount I would need to buy the house in England.  Before I go further I need to work out what taxes I am responsible for when selling an International property.

Is there a site on the net where I can locate good information for Canadian residents who are thinking of buying International real estate and the pros and cons of such an adventure?

Thank you very much for any advice you can offer.

david ingram replies:

You do not need a lawyer in Canada because the property is in the UK.

An exception is that the bvank likely wants to register the line of Credit against your Canadian  house and a lawyer might be a good idea to protect your interests.

After the purchase, fix up and sale, you would pay taxes on the profit first to the UK and then have to convert the dollars to Canadian and report the profit in Canada as well.

You would claim the tax paid to the UK on lines 431 and 433 of the Canadian return and the corresponding lines on the provincial 428 if the federal credit did no use it all up.
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Saving for retirement while working in the US


My wife and I are Canadian citizens working in California on TN visas. We are in the 25% US tax bracket. My employer offers a tax-deferred 403b plan and we are wondering whether we should take advantage of it or whether we would be better off paying the US income tax and save in an after-tax instrument. Many thanks in advance.


david ingram replies:

If you are working and living in the USA, there is nothing wrong with a 401(K) or 403(B) or IRA.

If you were commuting to work in the USA, you should not have a US tax deferred plan.

These older answers my help as well if you do retrurn to Canada.
Dear Sir,

I have been working in California for the 5 years on H1 visa  and have 401 plan(about 40K)
What should I do with this plan , when I will move to Canada ( I'm a PR.)
Move it to IRA or other option .
Thank you very much


david ingram replies:


In the US since 2001 and there is a 50-50 chance I will move back to Canada
in 2007 or beginning of 2008. What should I do with the following:

1.401K : I have a 50K+. Should I let it grow? Rollover in a IRA? should I
withdraw when I know for sure that I will move back? (I heard you can
rollover an IRA or 401K into a RRSP) what are the tax implications?

2. In the event I move to Canada, can I use my 401k or IRA toward the
purchase of my first home and not be taxed on my withdrawal.(I currently
rent in the US and never bought a property in Canada) Will the US recognize
a property bought in Canada as eligible for the first time home buyer

3. We wanted to contribute to a Coverdell education saving account this year
for our first child. Will Canada tax me upon distribution?

4. Is there a best time to move back to Canada, (late 2007 or beginning of

Thank you for your time
david ingram replies:

Your 401(K) can be rolled to an IRA.  Your IRA can then be rolled into an
RRSP but the US will not recognize it as a rollover and want to penalize you
10% for early withdrawal if you have not yet reached the exalted age of 59
1/2 at the time of withdrawal.

By buying a house, you can exempt up to $10,000 of the withdrawal from the
10% penalty.

Rolling it into the RRSP involves reporting the IRA as income on your
Canadian return and then claiming the deduction for the rollover. Because
the tax paid to the is a foreign tax credit in Canada, you get to claim the
tax paid to the USA against other income in Canada.

Therefore, it is necessary to have significant other income in Canada for
you to get the equivalent of a tax free rollover.  In other words, do NOT
move to Canada at the end of a year.  You should move at the start of a
year, i.e. Jan 15 to May 15 or so that you can get a lower tax rate on your
IRA withdrawal in the USA and maximum benefit for the foreign tax credit in

Done properly, and with the RRSP money in the account long enough in Canada,
you can then withdraw up to $20,000 Canadian (tax deferred) to use as a down
payment on your Canadian house.

the following previous email talks about it as well.


worked in CA for 4 yrs. returned to BC in Apr.'04.  Need to transfer my
retirement fund but having difficulties with bank and credit union.  US
specifies that I must roll it over to IRA accounts (Individual retirement
account.  I do not want to be subject to the 20% withholding fee for IRS.
What would be the best way to get the funds to me here in Canada.
david ingram replies:

1.  move it to an IRA and leave it there in one of the world's strongest
economies.  Most financial advisors are trying to get "more" of their
clients' money into US funds.

2.    If you just have to have it in Canada, you have to cash it in in the
US and pay your tax to the US.  take what is left, add the amount (even if
borrowed) of the tax you paid to the US and buy your Canadian RRSP.  That
will give you a tax deduction which should be larger than the tax you paid
to the US.

When you get the refund, pay back the loan.  You will have transferred the
money quite handily.

The amount you took out is also taxable on your Canadian return.  Pay that
tax with the tax you paid to the US as a foreign tax credit.

You will likely need help.

Don Walkow of Seabank Capital Management in Surrey, BC is one Canadian who
can help you with the process while you are still in the United States.  His
licensing allows him to deal with 401(K) plans, IRA's, RRSP's and straight
securities in any state in the US - He is one of two people I know of who
can do this. - His North American telephone number is 1-800-541-9952 and you
can find out more at

Darrell Thompson of Blackmont Securities is the other person and is located
in Toronto.  His phone number is 866-775-7704

If you are in Canada and in BC in particular, Fred Snyder, host of "Its Your
Money" every Sunday Morning from 9:00 to 10:30 AM Vancouver Time can also
look after you but can NOT talk to you if you are in the US. (999 out of
1,000 other Representatives in Canada can NOT talk to you either).  You can
listen to this Canadian Program (I am a guest on the fourth Sunday of every
month) live at
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Mother has just passed away - what next?

My mother passed away last week, I have sent a request for the book value and market value of the stock certificates,hopefully to the correct transfer agents addresses-some of this was confusing and will need advices re what to do next and the income tax for her small estate. We had joint accounts so that part is not an issue, and she had no other property.

david ingram replies:

After compiling all of the information, there is not an awful lot that you can do today about your mnother's final tax return.

1. You should get the application in for the CPP death benefit if Mom was receiving Canada Pension Plan.

2. If she was receiving CPP and the OAS, you should notify the Payers of her date of death.

3. If she was receiving any other pensions, you should notify those payers as well.

Then, you have to be aware that eveything that your mother owned on the date of death is considered to have been sold and reacquired on that date.

So, if your mother had a stock she paid $1,000 for and it was worth $1,300 on her date of death, her final 2007 tax return will have to account for that $300 profit as a capital gain.

Conversely, if she paid $2,000 for a stock and it was worth $1,500 on her date of death, her final return will have to account for the $500.00 loss.

If she owned a RRIF or RRSP at the date of death, the entire amount will go on the final return as taxable income
Her final return (dur April 30, 2008) will then include:

* Any interest paid to her up to the date of death

* Any dividends paid to her up to the date of death

* Any capital gains or capital losses incurred up to the date of death (if she sold anything herslf)

* Any capital gains or losses created by the deemed sales of the stock (or a second property as an example)

* any pensions paid to her until the date of death.

If she had bond interest, dividends or rents that were due to her but not paid at the date of death, it is also possible to prepare a second return to report these "rights and things".
The good part is that with everything in joint tenancy, there will be no need to probate a will or file an estate tax return,

But, because of this, the CPP death benefit (if there is one) will be taxable on your return

In the meantime, getting the value of the shares on her datre of death is exaclty what you should have done. The purchase price is also important and that may be different than the book value at the broker she was dealing with if she moved her account after purchasing the shares.
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UK gov't computer system charges wrong income tax

General News

Up to five million people may be paying the wrong income tax because HM Revenue and Customs' computer systems are "no longer well suited" to handling the tax, the U.K. National Audit Office has warned.

The figure, which comes in the NAO's report on HMRC's accounts for 2006-07, is five times higher than that identified in a separate report by the public spending watchdog that was published earlier this month.

The earlier examination of income tax collection found that more than a million people were paying the wrong amount of tax because of processing errors.

Speaking as the new report was published, Sir John Bourn, head of the NAO, said: "HMRC's computer systems are no longer well-suited to the efficient administration of income tax, especially where people have more than one job or change jobs frequently."

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Cross border tax advice

My wife and I are dual US/Canadian citizens and are contemplating relocating back to Canada from the US after an 11 year absense.  This relocation (to Ontario) could be either a complete relocation or a situation where we spend more than 6 months in the US but work in Canada the rest of the time.  There are RRSP's, a US residence and business assets involved, and future income will come from our owned businesses regardless of whichever country we end up calling our residence.   Does your firm provide confidential cross border tax advice in such situations, and how is that advice priced?   There is also the issue of Social Security, US Medicare, CPP and OAS, and how they could be maximized given that as of now we would fully qualify for Social Security and CPP and we could start drawing on them in about 7-8 years.  Does your firm also provide that kind of advice?   Thank you,   -----------------------------------------------
david ingram replies:

This was buried in some 2,000 questions I have received and NOT answered in the last month.

If you are dual citizens and spend most of the time in the USA, you will be taxed on your world income (all of it) in teh US and on any earnings in Canada as a factual resident.  Interestingly, you have picked the only province that allows you  to take out provincial medicare and keep it al;ive by spending 153 nights in Ontario.  Every other province requires more than 183 days which means that you are also taxable in Canada on your world income at that point.

I deal with all of the items you mention. �