Real Estate

Real estate holding company

  • Last Updated:
  • May 19th, 2017 12:57 pm
[OP]
Sr. Member
Nov 3, 2009
602 posts
160 upvotes
Calgary

Real estate holding company

I want to set up 3 tier structure but since I only own 4 properties, I decide to form real estate companies and a holding company (no management company.)

I'm pretty new to this and I've got few questions regarding tax. Hope these experienced can help me answer few of them.

1. The mortgage interest can be deducted from the profit. Can the mortgage principle or the lumpsum payment be treated as re-invest from the gain? (I know for stocks you can't but not sure about the real estate capital gain.)

2. To defer the tax, I will pay dividends from my RE company to hold company and be taxed 45%. But my RE company will receive a tax rebate which will reduce the tax rate to 25%. I can hold the money in the holding company and the holding company doesn't need to pay any tax. Is that correct?

3. For tax return, do I need to hire an accountant or this will be very simple since there's no active business?

4. Do I need a business account to gather rents or expense or a personal account should be fine?

Thank you guys in advance.
4 replies
Deal Addict
Feb 5, 2009
2294 posts
500 upvotes
Newmarket
1) Mortgage repayment is not a gain, it simply reduces the amount owing.
2) You really are not deferring any tax by moving dividends from one related corp to another.
3) Definetely need an accountant, especially given the questions asked.

What is the benefit of having multiple holding/re companies and no management co?
Deal Addict
Jun 2, 2012
1011 posts
307 upvotes
Homerhomer wrote:
May 18th, 2017 8:15 am
What is the benefit of having multiple holding/re companies and no management co?
This exactly......
[OP]
Sr. Member
Nov 3, 2009
602 posts
160 upvotes
Calgary
Homerhomer wrote:
May 18th, 2017 8:15 am
What is the benefit of having multiple holding/re companies and no management co?
The reason is the holco can hold multiple reco. Then all the gains from reco can transfer to holco and holco can declare dividends to other people or just hold these money until I feel the need to use these money again.

Do you mind to show me what's the benefit of a mgmco? Coz these properties are long team (1 year) lease and I don't know what I need a mgmco for.
Deal Addict
Feb 5, 2009
2294 posts
500 upvotes
Newmarket
ibuddler wrote:
May 18th, 2017 1:05 pm
The reason is the holco can hold multiple reco. Then all the gains from reco can transfer to holco and holco can declare dividends to other people or just hold these money until I feel the need to use these money again.

Do you mind to show me what's the benefit of a mgmco? Coz these properties are long team (1 year) lease and I don't know what I need a mgmco for.
Here is a link that explains the benefits of management company, pretty comprehensive article.
http://mpgroupcpa.com/post/3-tier-corpo ... investors/
By having simply multiple holding companies you are not gaining any tax benefits, and quite frankly you don't have to move dividends from one company to another to hold the funds, this can be achieved in one corporation. What you want to achieve is liability protection and tax savings,

btw yes you need a business account for each corporation, you are not allowed to deposit payments made to one entity into another entity bank account, personal bank account will not work.

Top