Common-Law Partners own two houses - Who pays the tax? -
QUESTION: Hi,
Both my common-law partner and I bought a house before we lived together in my house. We each pay his/her own house him/herself. However if later my partner sells her own house, will she have to pay tax for the capital gain?
-------------------------------------------------------------------david ingram replies:
Not necessarily. If her house is not rented and she sells it first and claims it tax free as her prinicpal residence, YOU have to pay tax on yours.
If hers is rented, then it will be taxable but again, she has four years to sell it tax gfree and if she did, YOURS would be taxable.
If the two of you owned the house you live in and also have/had a waterfront Saltspring cabin or a ski chalet at Whistler, you would have the opportunity to sell either tax free and pay tax on the other.
You obviously need to sit down and decide which one will be tax free and how the taxed one will be re-imbursed by the ftax free one.
To be tax free for four years if rented, she has to file an electionunder section 45(2).
The two of you might want to invest in a consultation with me or someone like me.
The following older Q&A might have been from your lady.
------------------------
.
QUESTION: I have owned my home for 4 years and have subsequently moved in with my boyfriend and am now planning to sell my home. I have been renting it out for the past six months and am wondering about the tax implications relating to capital gains, thank you in advance,_______________________________
david ingram replies:
You have not been living with the boyfriend long enough to be considered a common-law spouse sop at the moment - for a year anyway - you can both have a principal residence tax free.
After that, you are limited to one as a common law couple. Since you are selling yours now within a year, you will get any profit capital gains tax free by filing a section 45(2) election with your 2006 return reporting the rental income on schedule 776.
Attach a note to your 2006 tax return stating something like this
I hereby elect to consider the residence at xxx address, city, prov,etc, to be my principal residence for up to four years even though i did not ordinarily inhabit it after (date).
When you do sell, complete form T2091 to calculate the tax free portion. Form 2091 says you to do not need to file it with your return but keep it in case the CRA wants to see it. My suggestion is that you send it with the return and get it over with.
These older questions will give you a little more:
>> QUESTION:
>>
>> Hi,
>>
>> Last year, we rented out our condo in Vancouver. The
>> plan then was to have the rent cover our mortgage
>> payments for the 12 months that we would be away. A
>> short term solution.
>>
>> Now, we are planning to be away from BC for a longer
>> period of time (approx. 2 years) and wish to sell the condo
>> in the middle of the year, as we are unable to rent the
>> condo for any longer due to strata council by laws.
>>
>> 1) If we sell the condo when there has been a tenant living
>> in it for 12 months, will we pay capital gains?
>>
>> 2) What are our best options to avoid paying this tax?
>>
>> 3) If capital gains would be owed, for how long would we
>> have to make the unit our principal residence again before
>> we can sell it and not pay CGT?
>>
>> Thank you,
_________________________________________________________________
david ingram replies:
If you filed a section 45(2) election with your first year's rental, you
can rent the condo out for up to 4 years (plus 1 in the calculation)
without incurring capital gains tax if you have not bought another
residence that you are lioving in.
See Below:
My question is: Canadian-specific
QUESTION: Dear Mr. Ingram,
I bought a house in the December of year 2000, lived there till the end of December 2000 (3 weeks) and started to rent it out on January 1, 2001. I filed the election 45(2) to claim the house as my primary residence for years 2001, 2002, 2003 and will do it for 2004.
I do not claim a depreciation for those years.
I want to sell the house now. Do I need to move in house first in order to avoid the payment of the capital gain taxes. For how long I have to stay there to be eligible for not paying the capital gain taxes on sold house if I need to move in.
Thank you in advance for you help,
----------------------------------------------------------
david ingram replies:
QUESTION: Dear Mr. Ingram,
I bought a house in the December of year 2000, lived there till the end of December 2000 (3 weeks) and started to rent it out on January 1, 2001. I filed the election 45(2) to claim the house as my primary residence for years 2001, 2002, 2003 and will do it for 2004.
I do not claim a depreciation for those years.
I want to sell the house now. Do I need to move in house first in order to avoid the payment of the capital gain taxes. For how long I have to stay there to be eligible for not paying the capital gain taxes on sold house if I need to move in.
Thank you in advance for you help,
----------------------------------------------------------
david ingram replies:
First I am going to repeat your old
question from last July and my answer.
My question is: Canadian-specific
QUESTION: Hi, David!
I would like to know is it possible to use the election under the section 45(2) again if the old house is sold and the new one is bought. Can it be used unlimited number of times by the condition that it is used for each house only once.
Thank you
---------------------------------------------------------------------------
David Ingram replies:
QUESTION: Hi, David!
I would like to know is it possible to use the election under the section 45(2) again if the old house is sold and the new one is bought. Can it be used unlimited number of times by the condition that it is used for each house only once.
Thank you
---------------------------------------------------------------------------
David Ingram replies:
Section 45(2) is intended to allow
people to try something out. This means that if you move to a rented condo
for a couple of years and rent your house out, you can move back into the house
without suffering a capital gains tax under section
45(2).
Since it was passed on June 17,
1972, (32 years ago now) I have never seen it used more than twice by one
person.
Does not mean it has not been used
more than twice in thirty years, it just means it is
unlikely.
There is no numeric restriction but
if you are moving in and out of houses, the CRA will treat you as a trader and
tax you at full rates.
----------------------------------------------------------
Now, to answer this question.
Section 45(2) is NOT something you can plan to use. In other words, your
living in the house for three weeks and renting it out and filing a section
45(2) election does NOT make it tax free if you bought the house to rent and not
to live in as your personal principal residence.
Your question indicates to me that
you are trying to beat the system and did not buy the first house to live in and
unless you can show the tax office that you moved every stick of furniture in
and really intended to live there, the CRA will not allow it to be sold tax
free.
This year, a new policy of the CRA
is that they wish form T2091 to be filed with every tax return where a personal
house was sold during the year.
If it was your residence and you
genuinely intended to live there and were transferred of suddenly got married or
could not stand your neighbour or lost your driver's licence or suffered
some other disaster that caused you to "HAVE TO" move suddenly, filing section
45(2) will make it tax free provided you did not also own another house that you
did live in. If you did own another house that you actually
lived in, claiming the house you have filed the 45(2) election for as tax free,
will MAKE THE HOUSE YOU ACTUALLY LIVED IN TAXABLE.
If you have a genuine 45(2)
election, you do not need to move back in. If it is not a genuine 45(2),
moving back in will TRIGGER a tax bill as you move
in.
You need a consultation with someone
who knows the rules before you make a mistake. I am available in person or by
phone at a fee of $350.00 minimum for an hour but not until November
now.
As many know, I charge this for US /
Canada tax an immigration advice as well. I am not alone
though.
If you have a tough US
immigration question to ask or one that I cannot deal with (remember I do
Immigration AND tax) Joe grasmick is the place to g for a telephone
consultation. HIs fee is $295.00 per HALF hour and you can get hold of him
at http://s1.amazon.com/exec/varzea/ts/exchange-glance/Y01Y4838730Y0462867/104-8053170-6203936
I have sent two out of town people
to him in the last month where it was obvious to me tha tthe people needed a
lawyer as opposed to a consultant..
If you want a free answer for a
couple of minutes, remember
Answers to this and other
similar questions can be obtained free on Air every Sunday
morning.
Every Sunday at 9:00 AM on 600AM in
Vancouver, Fred Snyder of Cartier Partners and I will be hosting an INFOMERCIAL
but LIVE talk show called "ITS YOUR MONEY"
Those outside of the Lower Mainland
will be able to listen on the internet at
Local phone calls to (604) 280-0600
- Long distance calls to 1-866-778-0600.
Old shows are archived at the
site.
This from ask an income tax
immigration planning and bankruptcy expert consultant guru or preparer
from www.centa.com or www.jurock.com
or www.featureweb.com. Canadian David Ingram deals
daily with tax returns dealing with expatriate:
multi jurisdictional cross and trans border expatriate gambling refunds for the United States, Canada Mexico Great Britain the United Kingdom, Kuwait, Dubai, Saudi Arabia, South Africa, Thailand, Indonesia, Egypt, Antarctica, Japan, China, New Zealand, France, Germany, Spain, Italy, Russia, Georgia, Brazil, Peru, Ecuador, Bolivia, Scotland, Ireland, Hawaii, Florida, Montana, Morocco, Israel, Iraq, Iran, India, Pakistan, Afghanistan, Mali, Bangkok, Greenland, Iceland, Cuba, Bahamas, Bermuda, Barbados, St Vincent, Grenada,, Virgin Islands, US, UK, GB, American and Canadian and Mexican and any of the 43 states with state tax returns, etc.
income tax wizard wizzard guru advisor advisors experts specialist specialists consultants taxmen taxman tax woman planner planning
multi jurisdictional cross and trans border expatriate gambling refunds for the United States, Canada Mexico Great Britain the United Kingdom, Kuwait, Dubai, Saudi Arabia, South Africa, Thailand, Indonesia, Egypt, Antarctica, Japan, China, New Zealand, France, Germany, Spain, Italy, Russia, Georgia, Brazil, Peru, Ecuador, Bolivia, Scotland, Ireland, Hawaii, Florida, Montana, Morocco, Israel, Iraq, Iran, India, Pakistan, Afghanistan, Mali, Bangkok, Greenland, Iceland, Cuba, Bahamas, Bermuda, Barbados, St Vincent, Grenada,, Virgin Islands, US, UK, GB, American and Canadian and Mexican and any of the 43 states with state tax returns, etc.
income tax wizard wizzard guru advisor advisors experts specialist specialists consultants taxmen taxman tax woman planner planning
preparer of Alaska,
Alabama, Arkansas, Arizona,
California Denver Colorado, Connecticut,
Delaware District of Columbia Miami Florida,
Garland Georgia, Honolulu Hawaii, Idaho, Illinois,
Indiana Des Moines Iowa Kansas Kentucky,
Louisiana Bangor Maine Maryland Boston, Massachusetts, Michigan, Minnesota,
Mississippi, Missouri, Montana, Nebraska,
Nevada, New Hampshire, New Jersey,
New Mexico,New York, North Carolina,
North Dakota, Ohio, Oklahoma, Oregon.
Paris, Rome, Sydney, Australia Hilton
Pennsylvania, Rhode Island, Rockwall,
South Carolina, South Dakota, Tennessee,
Texas, Utah, Vermont, Virginia,
West Virginia, Wisconsin, Wyoming,
British Columbia, Alberta, Saskatchewan,
Manitoba, Ontario, Quebec City,
New Brunswick, Prince Edward Island,
Nova Scotia, Newfoundland, Yukon and
Northwest and Nunavit Territories,
Mount Vernon, Eumenclaw, Coos Bay
and Dallas Houston Rockwall Garland
Texas Taxman and Tax Guru and wizzard
wizard -
California Denver Colorado, Connecticut,
Delaware District of Columbia Miami Florida,
Garland Georgia, Honolulu Hawaii, Idaho, Illinois,
Indiana Des Moines Iowa Kansas Kentucky,
Louisiana Bangor Maine Maryland Boston, Massachusetts, Michigan, Minnesota,
Mississippi, Missouri, Montana, Nebraska,
Nevada, New Hampshire, New Jersey,
New Mexico,New York, North Carolina,
North Dakota, Ohio, Oklahoma, Oregon.
Paris, Rome, Sydney, Australia Hilton
Pennsylvania, Rhode Island, Rockwall,
South Carolina, South Dakota, Tennessee,
Texas, Utah, Vermont, Virginia,
West Virginia, Wisconsin, Wyoming,
British Columbia, Alberta, Saskatchewan,
Manitoba, Ontario, Quebec City,
New Brunswick, Prince Edward Island,
Nova Scotia, Newfoundland, Yukon and
Northwest and Nunavit Territories,
Mount Vernon, Eumenclaw, Coos Bay
and Dallas Houston Rockwall Garland
Texas Taxman and Tax Guru and wizzard
wizard -
David Ingram's US/Canada
Services
US/Canada/Mexico Tax Immigration & working Visa Specialists
US / Canada Real Estate Specialists
4466 Prospect Road (Personal residence by appointment only please)
North Vancouver, BC, CANADA, V7N 3L7
Calls accepted from 10 AM to 10 PM 7 days a week
Res (604) 980-3578 Cell (604) 657-8451
Bus (604) 980-0321 Fax (604) 980- 0325
[email protected] www.david-ingram.com
US/Canada/Mexico Tax Immigration & working Visa Specialists
US / Canada Real Estate Specialists
4466 Prospect Road (Personal residence by appointment only please)
North Vancouver, BC, CANADA, V7N 3L7
Calls accepted from 10 AM to 10 PM 7 days a week
Res (604) 980-3578 Cell (604) 657-8451
Bus (604) 980-0321 Fax (604) 980- 0325
[email protected] www.david-ingram.com
Disclaimer: This question has
been answered
without detailed information or consultation and
is to be regarded only as general comment.
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 & the author and any and all
non-contractual duties are expressly denied. All readers should obtain formal advice from a competent financial, or real estate planner or advisor & appropriately qualified legal practitioner, tax or immigration specialist in connection with personal or business affairs such as at www.centa.com.
as advice in any particular circumstances. No contract
exists between the reader & the author and any and all
non-contractual duties are expressly denied. All readers should obtain formal advice from a competent financial, or real estate planner or advisor & appropriately qualified legal practitioner, tax or immigration specialist in connection with personal or business affairs such as at www.centa.com.
David Ingram gives expert income tax & immigration help to
non-resident Americans & Canadians from New York to California to Saudi
Arabia to Mexico to China or Chile - Cross border, dual citizen - out of country
investments are all handled with competence &
authority.
No virus found in this incoming message.
Checked by AVG Free Edition.
Version: 7.5.476 / Virus Database: 269.10.1/889 - Release Date: 06/07/2007 8:00 PM
What's Related