Entrepreneurship & Small Business

Write off property investment expenses?

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  • Dec 9th, 2013 1:12 am
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Jan 13, 2013
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Write off property investment expenses?

Can expenses incurred for the specific purpose of evaluating properties be written off against income not related to those properties?

In an example, prior to buying a property you may hire inspectors to validate that the building meets building, fire and municipal bylaws, has current occupancy permits etc. Those inspections can cost a few hundred dollars and if you dig up something that results in you deciding the purchase doesn't make sense you are out of pocket those expenses. You will earn no income from that property because you don't purchase it so can you write those expenses off against income from your regular day job?
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Feb 15, 2008
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Calgary
themitsuo wrote: Can expenses incurred for the specific purpose of evaluating properties be written off against income not related to those properties?
If you're in the business, or propose to be in the business of acquiring property, and have a reasonable expectation of profit, absolutely.

In an example, prior to buying a property you may hire inspectors to validate that the building meets building, fire and municipal bylaws, has current occupancy permits etc. Those inspections can cost a few hundred dollars and if you dig up something that results in you deciding the purchase doesn't make sense you are out of pocket those expenses. You will earn no income from that property because you don't purchase it so can you write those expenses off against income from your regular day job?
You would have to convince the CRA, on audit, that you had a legitimate interest in acquiring property for taxable purposes. ie: a legitimate reason to incur the expense.

In your case, yeah, if you did that, and obtained a derogatory opinion and decided not to go through with such, you'd definitely be able to declare and deduct that as a business expense. Many taxpayers do this, ie: employ analysts and other professionals, which advise them accordingly, and its all deductible.

The CRA would take a look at the totality of the actions of a taxpayer, and render a decision on audit. All CRA decisions, of course, can be appealed to Tax Court.

Of course you can't deduct expenses relating to the acquisition of a principal residence, as such is not taxable. And if you keep submitting claims of a similar nature over and over again, each year, eventually the CRA might start to deny them. At some point, being in the business of something is actually doing something, not just "window shopping".
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