Selling Rental Property - international non-resident cross border income tax help estate family trust assistance expert pre
Hi Dave
You
advised recently that deduction of rental property mortage interest(s) is Kosher
only if you realistically expect to realise a positive cash flow from rental
income within a reasonable span of time.
With the cost of an average house or condo nowadays, a mortgage would have to be payed down alot for the rent to actually provide a surplus.
What if it never produces a positive cash flow and you just sell it? Will the years of claimed deductions come into question?
What if you move into it upon retirement? Will you be accused of never intending to realise a positive cash flow?
_____________________________________david ingram replies:
If you bought an apartment to move into in five years and the projected rental cash flow upon purchase showed negative every year, you would not be allowed to claim the rental loss in the interim.
If you bought a rental profit to movie into in 15 years and it projected rental losses for seven years and a rental profit for eight, you would be allowed the rental losses even if the actual projection became wrong and you actually lost money for 11 years.
If you bought an apartment as an investment to sell at a profit and rent it out in the meantime as a method of helping with the payments, any losses are NOT deductible because you did not buy it to rent but to sell for a profit at a specific time.In addition, any profits on the sale would be subject to straight income taxes, not capital gains.
If you bought an apartment to rent out for ever and were forced to sell in 3 or 7 or 10 years because of outside circumstances, the rental; losses would be deductible and any profit on the sale would be taxed at Capital Gains rates.
Obviously, there is something in between. However, 'Anything' you buy for personal use or eventual personal use is subject to restrictions on the amount of rental loss you can claim as a deduction against other income.
Goto www.centa.com and read the rental income section in the TAX GUIDE in the top left hand box.
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david ingram wrote:
Calls welcomed from 10 AM to 9 PM 7 days a week Vancouver (LA) time - (please do not fax or phone outside of those hours as this is a home office)
$1,600 would be for two people with income from two countries
David Ingram expert income tax help and preparation of US Canada Mexico non-resident and cross border returns with rental dividend wages self-employed and royalty foreign tax credits family estate trust trusts income tax convention treaty
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Disclaimer: This question has been answered without detailed
information or consultation and is to be regarded only as general
comment. Nothing in this message is or should be construed as advice
in any particular circumstances. No contract exists between the reader and the
author and any and all non-contractual duties are expressly denied. All
readers should obtain formal advice from a competent and
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Be ALERT, the world needs more
"lerts"
David Ingram gives expert income
tax & immigration help to non-resident Americans & Canadians from
New York to California to Mexico family,
estate, income trust trusts Cross border, dual citizen - out of
country investments are all handled with competence &
authority.
Phone consultations are $400 for 15 minutes to 50
minutes (professional hour). Please note that GST is added if product remains in
Canada or a phone consultation is in Canada.
This is not intended to be definitive but in
general I am quoting $800 to $2,800 for a dual country tax return.
$800 would be one T4 slip one W2 slip one or two
interest slips and you lived in one country only - no self employment or rentals
or capital gains - you did not move into or out of the country in this
year.
$1,000 would be the same with one rental
$1,200 would be the same with one business no
rental
$1,200 would be the minimum with a move in or out
of the country. These are complicated because of the back and forth foreign tax
credits. - The IRS says a foreign tax credit takes 1 hour and 53
minutes.
$1,500 would be the minimum with a rental or two in
the country you do not live in or a rental and a business and foreign tax
credits no move in or out
$1,600 would be for two people with income from two countries
$2,800 would be all of the above and you moved in
and out of the country.
This is just a guideline for US / Canadian
returns
We will still prepare Canadian only (lives in
Canada, no US connection period) with two or three slips and no capital
gains, etc. for $150.00 up.
With a Rental for $350
A Business for $350 - Rental and business likely
$450
And an American only (lives in the US with no
Canadian income or filing period) with about the same things in the same range
with a little bit more if there is a state return.
Moving in or out of the country or part year
earnings in the US will ALWAYS be $800 and up.
TDF 90-22.1 forms are $50 for the first and $25.00
each after that when part of a tax return.
8891 forms are generally $50.00 to $100.00
each.
18 RRSPs would be $900.00 - (maybe amalgamate a
couple)
Capital gains *sales) are likely $50.00 for
the first and $20.00 each after that.
Just a guideline not etched in
stone.
This from "ask an income trusts tax and immigration expert"
from www.centa.com or www.jurock.com or www.featureweb.com. David Ingram deals on a daily
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