Personal Finance

primary house for living issue

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  • Mar 1st, 2006 10:45 pm
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Deal Expert
Aug 2, 2001
16014 posts
6196 upvotes
grant wrote:- Are you a tax accountant?
- Do you set CRA policy?
- Have you ever been reassessed by the CRA for claiming a triplex as a principal residence?

Unless you answered "yes" to any of these questions, you have no basis to say you're "sure" a claimant will be reassessed in this situation.
It's what the 7 different accountants I talked to told me when I wanted to do the same thing.

They mentioned that they would bet on it catching up to me, and then I'd have quite a bit of explaining to do.

As you may be aware, what you quoted is not tax law or even an official bulletin regarding their interpretation of tax law. (edit: the clue is the vague term "relatively small" .. official interpretation needs concrete guidelines.)
It is CCRA interpretation of the tax act.

Which means that CCRA uses their interpretation to determine whether a re-assessment is needed.
If you or anyone is scared about claiming your maximum legal deductions, then definitely obtain the services of an expert tax accountant. For only a few hundred dollars they will clarify everything for you, and, if the CRA audits or challenges you, they will typically prepare and present your defence for free. (ask ahead of course).
I will definetely agree with you there - if you are claiming deductions that are a large figure it is best to consult with a professional, and for the small price you'll pay it will bring you great peace of mind.
Deal Fanatic
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Aug 19, 2001
5089 posts
34 upvotes
Vancouver
TrevorK wrote:It's what the 7 different accountants I talked to told me when I wanted to do the same thing.

They mentioned that they would bet on it catching up to me, and then I'd have quite a bit of explaining to do.
Certainly obtaining the same opinion from 7 tax accountants is certainly a strong reason to hold an opinion.

Did any of them reference any recent instances of a taxpayer being re-assessed for such a claim? Did any of them mention & refute the Saccomano case?

Just curious...

this situation reminds me a lot of the "Smith Maneuvre" ... although there are CRA "interpretations" that disallow paper transactions to make mortgages deductible. A taxpayer took CRA to court and won, and now everyone & their dog is happily performing this technique without any fear of going to court.
Deal Expert
Aug 2, 2001
16014 posts
6196 upvotes
grant wrote:Certainly obtaining the same opinion from 7 tax accountants is certainly a strong reason to hold an opinion.

Did any of them reference any recent instances of a taxpayer being re-assessed for such a claim? Did any of them mention & refute the Saccomano case?

Just curious...
No - they didn't provide reference. They just gave me their professional opinion.

They mentioned that I may get away with it, however they mentioned that in my scenario it just wasn't worth the little extra I would get for the potential hassle.

I mean, if we're dealing with a triplex and $2000/month in rent, then perhaps it may be. I was consulting on my situation, which is just in the hundreds per month. However, the potential hassles they referred to would still apply - just the gains if you are successful are that much better ;)
Deal Fanatic
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Aug 19, 2001
5089 posts
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Vancouver
I don't think the issue is the rent-per-month (which is pretty cut & dry to be taxable income) ... the issue is capital gains on the property when it's sold.

Example: if you have a $300,000 triplex, and its value rises to $450,000 over the 15 years you live there, then you have $50,000 vs. $150,000 in homeowners exempt capital gains ($100k difference). That $100k difference is $50k worth of taxable income. At a 40% tax bracket, that's $20,000 out of pocket.

....
Now let's pull this example back to the decision facing the OP today: let's assume the worst case scenario comes to pass, i.e., CRA re-assesses the sale to the tune of a $20,000 tax bill which cannot be repealed. (a situation which I consider incredibly remote, and you consider very possible). If we do some rough guesses, those 20,000 future dollars are worth about 125 pre-tax today dollars, per month.

So... should he choose to buy a triplex (vs. a duplex or lesser) .. can he collect an extra $125/mo in profit from the triplex? If the answer is yes, then there is no downside and lots of upside from the triplex purchase.

In particular:
- Excess rent from an extra room is likely to result in more than $125/mo profit
- A revenue generating triplex ought to enjoy superior appreciation
- there is some possibility that the capital gains will not be taxed.
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Aug 19, 2001
5089 posts
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A line of credit secured against the equity in a person's home.

Like a mortgage, except you don't borrow it all at the start & slowly pay it back... you can borrow some or all of it at any time, pay some or all of back at any time.

Usually the lender demand interest be paid monthly though.
[OP]
Sr. Member
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Jun 22, 2005
787 posts
grant wrote:A line of credit secured against the equity in a person's home.

Like a mortgage, except you don't borrow it all at the start & slowly pay it back... you can borrow some or all of it at any time, pay some or all of back at any time.

Usually the lender demand interest be paid monthly though.
sorry to be little dummy on the terminologies... ^^whats it mean...
faizal :lol:

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