Real Estate

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

  • Last Updated:
  • Mar 23rd, 2017 5:27 pm
Deal Addict
Nov 22, 2015
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oasis2002 wrote:
Mar 20th, 2017 11:02 pm
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.
Did you read 2.5? If you sold a rental and didn't live in it, and didn't pay taxes, then your "accountant" helped you commit tax fraud. Congrats.
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Sep 16, 2009
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superfresh89 wrote:
Mar 21st, 2017 12:37 am
Did you read 2.5? If you sold a rental and didn't live in it, and didn't pay taxes, then your "accountant" helped you commit tax fraud. Congrats.
Good god. lol! Why does everyone get so worked up on a web board and get their panties in a twist? There is a difference between using loopholes and committing tax frauds. In this case, if op lived in it even for a month - or maybe didn't but it wasn't occupied by renters, then used the appropriate election and paid taxes on rental income and didn't have any other primary house, then it's all kosher. That's the base case scenario. There may or may not be a way to do this retroactively - and that's where an accountant can come in. I don't know - maybe you do or don't. And if there isn't, then there isn't. But people assume that just because ur not living somewhere, it's not ur primary residence - and that's not true - and that's what I was trying to clear up.
Jr. Member
Jun 24, 2011
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West Lafayette, Indi…
The CRA language is vague. The key words being "some time". Technically, if one lives in it for one day, one can declare it as principal residence. (1 PR in the world). And one can rent it out for up to 4 years under 45(2) election. One has to move back in after the four years and continue electing it as PR until finally selling it. The capital gains assessment is made then from the start and PRE should cover all the gains. (provided no capital loss is claimed)

This is the current law and there is no reason not to take advantage of it.
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Dec 13, 2016
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It doesn't matter. The property was clearly bought as investment with 2 other parties. It was never a primary residence.

The OP should prepare his check book.
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Nov 22, 2015
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oasis2002 wrote:
Mar 21st, 2017 5:54 am
Good god. lol! Why does everyone get so worked up on a web board and get their panties in a twist? There is a difference between using loopholes and committing tax frauds. In this case, if op lived in it even for a month - or maybe didn't but it wasn't occupied by renters, then used the appropriate election and paid taxes on rental income and didn't have any other primary house, then it's all kosher. That's the base case scenario. There may or may not be a way to do this retroactively - and that's where an accountant can come in. I don't know - maybe you do or don't. And if there isn't, then there isn't. But people assume that just because ur not living somewhere, it's not ur primary residence - and that's not true - and that's what I was trying to clear up.
IndustrialKid wrote:
Mar 21st, 2017 8:29 am
The CRA language is vague. The key words being "some time". Technically, if one lives in it for one day, one can declare it as principal residence. (1 PR in the world). And one can rent it out for up to 4 years under 45(2) election. One has to move back in after the four years and continue electing it as PR until finally selling it. The capital gains assessment is made them and PRE should cover all the gains. (provided no capital loss is claimed)

This is the current law and there is no reason not to take advantage of it.
Not a great loophole that many will take advantage of.

Basically it's a perfect scenario where you made the declaration​ at the right time, found renters, found yourself a place to rent for 3.9 years (since you can't own any other properties), and move back in before the 4 year mark.
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Jun 24, 2011
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West Lafayette, Indi…
superfresh89 wrote:
Mar 21st, 2017 8:49 am
Not a great loophole that many will take advantage of.

Basically it's a perfect scenario where you made the declaration​ at the right time, found renters, found yourself a place to rent for 3.9 years (since you can't own any other properties), and move back in before the 4 year mark.
From my understanding, anybody currently renting a condo and working downtown can buy a house in the suburbs, "live" in it for a while (1 month), then find a renter to cover the cashflow. After 4 years, when he or she is ready to get married and settle down, move back in and resume the PRE from the time they bought the house.
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Nov 22, 2015
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IndustrialKid wrote:
Mar 21st, 2017 9:00 am
From my understanding, anybody currently renting a condo and working downtown can buy a house in the suburbs, "live" in it for a while (1 month), then find a renter to cover the cashflow. After 4 years, when he or she is ready to get married and settle down, move back in and resume the PRE from the time they bought the house.
It's still a bit of a long shot. 4 years is a lot of time and plans often change quickly. If the timing works, then sure.

You'd also run the risk of being cashflow negative for the time you're renting it out.
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Sep 16, 2009
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superfresh89 wrote:
Mar 21st, 2017 9:05 am
It's still a bit of a long shot. 4 years is a lot of time and plans often change quickly. If the timing works, then sure.

You'd also run the risk of being cashflow negative for the time you're renting it out.
Yes its a long shot - but not really. The point is that you dont have to sell your house the minute you need to move for some unforeseen reason and thats the reason this clause exists and 4 yrs is considered long enough to sell it or convert it to rental/other property. Of course it will be abused by some people but as it stands now, it allows one to rent a place and claim another as primary residence as long as certain conditions are met. In fact (!) i believe there are some other conditions in which the election can be for longer than even 4 yrs.

The more likely case in which it is used is: Family is living in one house - has to move and does so and doesnt have time to sell family house and so rents another place or buys another place somewhat far from main house and once settled in, come back and sell first house. Its hardly a loophole though, because for the time they claim old house as primary, they cant make that claim for new house.
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Jun 24, 2011
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West Lafayette, Indi…
superfresh89 wrote:
Mar 21st, 2017 9:05 am
It's still a bit of a long shot. 4 years is a lot of time and plans often change quickly. If the timing works, then sure.

You'd also run the risk of being cashflow negative for the time you're renting it out.
Cash flow negative on the surface, but forced saving in reality. Meanwhile, there is no need for a car (money), gas & insurance (money), utility for a house with only one living in it (money). Not to mention appreciation. It would work out well if the individual is disciplined and enjoys city life. The best part now is the mortgage interest becomes deductible just like in the States. Ted from How I Met Your Mother did it and it can work for young Torontonians too.
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Sep 16, 2009
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IndustrialKid wrote:
Mar 21st, 2017 12:27 pm
Cash flow negative on the surface, but forced saving in reality. Meanwhile, there is no need for a car (money), gas & insurance (money), utility for a house with only one living in it (money). Not to mention appreciation. It would work out well if the individual is disciplined and enjoys city life. The best part now is the mortgage interest becomes deductible just like in the States. Ted from How I Met Your Mother did it and it can work for young Torontonians too.
Yes mortgage interest is deductible, but dont forget to report the income! Also, not sure if you can claim normal credits which one might when renting.
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I hope he used the public library or IP addresses can be traced. :(
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Jul 14, 2008
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Wait, does that mean they also declared this as a primary residence when closing, meaning they received the HST rebate you'd regularly have to pay up front. On $600K? Yikes!

If you declared it properly from the outset you can get that back (after paying it at closing), but does anyone know if this rebate has a statute of limitations? If so, my goodness I'm having heart palpitations just thinking of how crazy risky this is.
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Jul 23, 2014
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onlineharvest wrote:
Mar 21st, 2017 5:43 pm
Wait, does that mean they also declared this as a primary residence when closing, meaning they received the HST rebate you'd regularly have to pay up front. On $600K? Yikes!

If you declared it properly from the outset you can get that back (after paying it at closing), but does anyone know if this rebate has a statute of limitations? If so, my goodness I'm having heart palpitations just thinking of how crazy risky this is.
That's the problem. OP is a prime example of people speculating in this RE environment.

Buying anything without fully knowing the risks and taxes involved. If he knew that there was taxes and penalties to pay from the onset, he wouldn't have considered buying property due to the risks/reward, cost/benefit.

Don't get me wrong, I am not against well educated speculators. Those that analysed the risks and know what could be the consequences if the investment goes south take that risk. They have every right to reap the rewards.

What concerns me are speculators like OP. Everyone and their mothers are buying with no regard of the consequences if everything comes crashing down. hysteria I tell you.
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Aug 12, 2004
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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?
I initially planned to reply all the missing gaps in your post and how much penalties you will be hit with, but since so many people talked about it, I never bothered.

Buying an investment property and claiming it as principle resident (likely claiming the first time home buyer tax credit fraudulently)
Collecting rent income and likely not paying taxes while under principle residence status
Insurance fraud

Then I found this thread

how-do-title-transfer-my-existing-prope ... #p26936841
uwbuchanan wrote:
Oct 21st, 2016 3:12 pm
How to do a title transfer on my existing property?

Say I transfer my house to my parents
and this thread
uwbuchanan wrote:
Nov 21st, 2016 9:36 pm
I need to transfer my primary residence to my parents who currently don't own any property.

If my parents don't own any property, what document do they need to bring to the bank to apply for mortgage?

It is not a private sale. I am just transferring my existing mortgage of 30k to my parents.

Moreover, is there any tax concern if we transfer with a value of $0?
Is this the same property in question? Attempt at land title fraud, tax fraud, you better hope none of this is traced back to you. Such blatant fraud of this magnitude can lead to jail time as it is clearly intentional.

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