Real Estate

How will I be taxed if I am in a joint property investment

  • Last Updated:
  • Mar 21st, 2017 6:05 pm
[OP]
Newbie
Oct 13, 2016
85 posts
2 upvotes

How will I be taxed if I am in a joint property investment

i purchased a property with two other friends in Waterloo 3 years ago.

We purchased around 600k and sold it this year around 960k. However, this is the only property I had around the world. So i put my address at this property in the past 3 years as my primary residence for tax as well (vehicle insurance is cheap as well). The other two owners' primary residence are in Toronto.

In the past 3 years, we rented out the property to students almost from day 1, and I was living with my parents in the 3 years.

So how will I be taxed in this case? Should I pay the 50% investment tax=360k/3*50%=60k?
28 replies
Jr. Member
User avatar
Dec 13, 2016
163 posts
91 upvotes
You put a property as a primary residence while renting it out? How does that work?

I suspect all your "profit" will be wiped out with CRA penalties.
[OP]
Newbie
Oct 13, 2016
85 posts
2 upvotes
Everyone is renting out their primary residence?

Why can't I?

There is no law saying that I cannot rent out my primary residence.
Jr. Member
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Dec 13, 2016
163 posts
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uwbuchanan wrote:
Mar 19th, 2017 12:21 am
Everyone is renting out their primary residence?

Why can't I?

There is no law saying that I cannot rent out my primary residence.
ROFL..... Seriously??
Deal Addict
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Mar 14, 2006
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cra fraud
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you ok until you get caught.
Newbie
Jun 6, 2014
62 posts
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Toronto, ON
Yes, divide the profit by 3 and that would be your share of the profit.
Deal Addict
Dec 30, 1969
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Toronto, ON
uwbuchanan wrote:
Mar 18th, 2017 11:48 pm
i purchased a property with two other friends in Waterloo 3 years ago.

We purchased around 600k and sold it this year around 960k. However, this is the only property I had around the world. So i put my address at this property in the past 3 years as my primary residence for tax as well (vehicle insurance is cheap as well). The other two owners' primary residence are in Toronto.

In the past 3 years, we rented out the property to students almost from day 1, and I was living with my parents in the 3 years.

So how will I be taxed in this case? Should I pay the 50% investment tax=360k/3*50%=60k?
http://www.cra-arc.gc.ca/tx/tchncl/ncmt ... tml#N10293

Pay close attention to 2.10, which means you cant declare if you rented the house out to students from day 1.

I'm not sure you understand what you're doing is trying to skirt the CRA rules so that you don't get taxed on an investment property and treated as a Principal residence.

edit: someone posted the above link
Deal Addict
Nov 24, 2013
3500 posts
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Kingston, ON
uwbuchanan wrote:
Mar 18th, 2017 11:48 pm
So how will I be taxed in this case? Should I pay the 50% investment tax=360k/3*50%=60k?
That $60K (50% capital gain inclusion on $120K) gets added to your taxable income, and then you pay tax on that. It's not a "50% investment tax;" it's you only paying half your normal tax rate on the gain. Also, realtor commission and legal fees reduce your gain, so it might be something like $330K/3=$110K * 50% = $55K taxable

Have you been paying tax on the rental income all along on this property? I'm concerned that it sounds like you're not. You should have been paying tax on rental income for the past three years, on top of claiming the gain when you sell. If you pay tax now on the gain (as you should, it's not your principal residence if you never lived there), they're probably going to look into the past few years to make sure you reported your rental income.
Sr. Member
Dec 30, 1969
524 posts
282 upvotes
Toronto, ON
Oh boy, then penalties are going to be huge!
Deal Addict
Nov 22, 2015
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uwbuchanan wrote:
Mar 19th, 2017 12:21 am
Everyone is renting out their primary residence?

Why can't I?

There is no law saying that I cannot rent out my primary residence.
I think you are confused. You said that it's your primary residence, yet you ask about paying capital gains taxes. If it's your primary residence (it's not), then you don't pay taxes on your gains - it can't be both. If you've been living with your parents for the past 3 years, then your primary residence is your parent's address.

I hope you've been splitting the rental income and reporting it on your taxes for the last 3 years.
Jr. Member
Sep 16, 2009
185 posts
31 upvotes
uwbuchanan wrote:
Mar 18th, 2017 11:48 pm
i purchased a property with two other friends in Waterloo 3 years ago.

We purchased around 600k and sold it this year around 960k. However, this is the only property I had around the world. So i put my address at this property in the past 3 years as my primary residence for tax as well (vehicle insurance is cheap as well). The other two owners' primary residence are in Toronto.

In the past 3 years, we rented out the property to students almost from day 1, and I was living with my parents in the 3 years.

So how will I be taxed in this case? Should I pay the 50% investment tax=360k/3*50%=60k?
Contrary to what many are posting here, since you did not elect any other primary residence, you can claim this as primary residence. Its a bit convoluted though and you have to make a formal declaration (some form needs to be filled out) when you start renting it out. The one other thing is that you should have reported income. I think you need an accountant to iron this out. Also, if you do it properly, there will not be any tax.
Last edited by oasis2002 on Mar 20th, 2017 6:04 pm, edited 1 time in total.
Jr. Member
Sep 16, 2009
185 posts
31 upvotes
oasis2002 wrote:
Mar 20th, 2017 6:04 pm
Contrary to what many are posting here, since you did not elect any other primary residence, you can claim this as primary residence. Its a bit convoluted though and you have to make a formal declaration (some form needs to be filled out) when you start renting it out. The one other thing is that you should have reported income. I think you need an accountant to iron this out. Also, if you do it properly, there will not be any tax.
You can carry over such an election for 4 years I believe.
Deal Addict
Nov 22, 2015
1238 posts
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oasis2002 wrote:
Mar 20th, 2017 6:04 pm

Contrary to what many are posting here, since you did not elect any other primary residence, you can claim this as primary residence. Its a bit convoluted though and you have to make a formal declaration (some form needs to be filled out) when you start renting it out. The one other thing is that you should have reported income. I think you need an accountant to iron this out. Also, if you do it properly, there will not be any tax.
oasis2002 wrote:
Mar 20th, 2017 6:05 pm
You can carry over such an election for 4 years I believe.
I don't know what world you're living in, but you're straight up wrong.
A property qualifies as your principal residence for any year if it meets all of the following four conditions:
•It is a housing unit, a leasehold interest in a housing unit, or a share of the capital stock of a co-operative housing corporation you acquire only to get the right to inhabit a housing unit owned by that corporation.
•You own the property alone or jointly with another person.
•You, your current or former spouse or common-law partner, or any of your children lived in it at some time during the year.
•You designate the property as your principal residence.
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs ... w-eng.html

OP has not lived on the property EVER. He absolutely cannot legally declare it as his primary residence.
Jr. Member
Sep 16, 2009
185 posts
31 upvotes
superfresh89 wrote:
Mar 20th, 2017 6:11 pm
I don't know what world you're living in, but you're straight up wrong.



http://www.cra-arc.gc.ca/tx/ndvdls/tpcs ... w-eng.html

OP has not lived on the property EVER. He absolutely cannot legally declare it as his primary residence.
Read section 2.50
http://www.cra-arc.gc.ca/tx/tchncl/ncmt ... 2-eng.html

Might be a moot point though because doesn't look like the appropriate election was made. Anyway, I might be wrong. Not sure straight up wrong. I have legally used this very legal election.

Just get a good accountant is all I will say. They tend to know more than I and many other people here do.
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