Home & Garden

New construction changed the purpose of usage within the first year

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  • Feb 28th, 2018 9:40 pm
[OP]
Sr. Member
Jan 4, 2013
578 posts
117 upvotes
TORONTO

New construction changed the purpose of usage within the first year

I closed a pre construction house a few month ago, at the time of close, my lawyer registered it as self occupied by the owner as primary resident. So I didn’t pay to the builder the 24k hat rebate.

However, I rented out the house later, and myself moved to my parents house. The tenant reported to CRA on the rent.

So for my filing to Cra, should I report it as primary residence or rent property? I am losing money on this property, my long term goal is to put loss on this property if possible, as I see government is still attacking the market. I am thinking to take capital loss on it to offset the capital gain on other properties.

What is the best action I should do now?
Thanks.
13 replies
Deal Guru
User avatar
Mar 23, 2008
12333 posts
8755 upvotes
Edmonton
You are claiming your income, or at least filing your rental income portion, even if you are running at a loss? Because if your tenant claims the rent and you don't, I would suspect you risk making them curious. And having the CRA curious is rarely fun.

As far as your other question (whether you should claim it as a primary residence or rental property), you can't take a capital loss on it if it's your primary residence, I don't think. Plus the fact that you're filing for rental income. If you've never registered it as your primary residence, I think you should claim it as a rental property.

C
[OP]
Sr. Member
Jan 4, 2013
578 posts
117 upvotes
TORONTO
Thanks. My main question is on the hst and capital loss part. As I have no problem reporting the rental income.

Last time, I had new construction that I intended to rent out for the first year, I actually paid the 24k hst rebate on closing, and claimed it back one year after.
For this time, if I tell cra that I changed my usage purpose, will it cause any trouble?
CNeufeld wrote: You are claiming your income, or at least filing your rental income portion, even if you are running at a loss? Because if your tenant claims the rent and you don't, I would suspect you risk making them curious. And having the CRA curious is rarely fun.

As far as your other question (whether you should claim it as a primary residence or rental property), you can't take a capital loss on it if it's your primary residence, I don't think. Plus the fact that you're filing for rental income. If you've never registered it as your primary residence, I think you should claim it as a rental property.

C
[OP]
Sr. Member
Jan 4, 2013
578 posts
117 upvotes
TORONTO
This is the first year that I need to file tax on this property. The only communication I had with Cra on this property is on hat rebate form.

Do you think I still stand a chance to register it as rental property?
CNeufeld wrote: You are claiming your income, or at least filing your rental income portion, even if you are running at a loss? Because if your tenant claims the rent and you don't, I would suspect you risk making them curious. And having the CRA curious is rarely fun.

As far as your other question (whether you should claim it as a primary residence or rental property), you can't take a capital loss on it if it's your primary residence, I don't think. Plus the fact that you're filing for rental income. If you've never registered it as your primary residence, I think you should claim it as a rental property.

C
Deal Addict
Dec 17, 2007
2447 posts
1421 upvotes
Alliston, ON
When I bought my new house a few years ago, the CRA requested proof that we were living in the house when tax time came. If you report rental income, or if your tenant reports it, that could very well trigger the CRA or come after their 24k you owe them
If you report it as a rental I believe you still qualify for a rebate, just not the full 24k.
Deal Expert
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Feb 11, 2007
16516 posts
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Oakville
Sounds like you paid way too much for your house. Sucks.
You might want to speak to a tax lawyer to make sure you're reporting correctly and don't get bent over by the CRA for false reporting.
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Deal Addict
Mar 14, 2006
1588 posts
1239 upvotes
Toronto
If you rented it out then it is definitely rental; income/loss.
Deal Guru
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Oct 6, 2010
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Toronto
lol, rent out the house I bought and move back in with mom, lol.

You have to claim as rented, you can't say primary residence when that's your mom's house. The CRA is going to love you some long time. And I mean, once you get hit, you will 'randomly' get hit year after year after year. Have fun submitting all your paperwork. Hopefully you're not doing your own taxes if you can't answer a simple question.

https://www.canada.ca/en/revenue-agency ... ebate.html

https://www.canada.ca/en/revenue-agency ... c4028.html
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Deal Expert
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Jun 12, 2007
16415 posts
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London
gimegime wrote: Thanks. My main question is on the hst and capital loss part. As I have no problem reporting the rental income.

Last time, I had new construction that I intended to rent out for the first year, I actually paid the 24k hst rebate on closing, and claimed it back one year after.
For this time, if I tell cra that I changed my usage purpose, will it cause any trouble?
Believe the hst rebate is the same $ value, regardless of whether you live in or it’s a rental. It’s just a different name/form that’s filled out (owner occupied = builder applies for rebate on your behalf, rental = you apply yourself, builder out of the loop)

The HST rebate is only a problem if it’s never occupied, either by a renter or owner (yourself)

In your case, you actually did live in it ( save the utility bills , address change stuff with your name and new address) then it became a rental, so it was occupied for the first year
Deal Guru
Feb 9, 2006
12284 posts
6846 upvotes
Brampton
I like the cut of your jib op... Thinking of tax fraud bravo.

Obviously if you rented it you need to declare it as such. And those losses need to be written off against something. You can't say you lost rental income against it not being a rental.
You'll likely trigger an audit if you try. The CRA isnt lenient either they might ask you to provide receipts of previous years and do future spot audits.
Deal Addict
User avatar
Jan 8, 2009
1397 posts
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Brampton
Your lawyer is really not smart. If you planned on renting it out after closing, you should have paid the HST and claimed it right after tenant moved in and got the HST back. You should have been out of that HST money for a month or two at most but saved you this headache. As others have suggested, don't create flags for CRA. You will be sorry for next few years.

We don't know if that's what the lawyer suggested to save his work or maybe acted on your suggestion to save the HST.
Deal Addict
Sep 12, 2017
1896 posts
186 upvotes
Also have a new home, and saved on the HST rebate. Thinking of maybe renting a room out/ with separate washroom. Would this have any effect on the HST-rebate and year end tax filing?
Deal Guru
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Mar 23, 2008
12333 posts
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Edmonton
reggyDeal wrote: Also have a new home, and saved on the HST rebate. Thinking of maybe renting a room out/ with separate washroom. Would this have any effect on the HST-rebate and year end tax filing?
I don't think it's an issue if it's your principal residence. The OP may have an issue because it wasn't their principal residence, although the intention for it to be their principal residence may make a difference.

C
Deal Addict
User avatar
Oct 13, 2008
4959 posts
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The government will perform an audit.

At that time ... you will be re-assessed on your new purchase.

At which time ... you will be fined and have to repay the $24000 HST Rebate ... plus interest.
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