Question is: Canadian-specific
QUESTION: Two years ago when we bought our house there was a tenant in an
illegal down stairs suite and we continued the tenancy agreement. Since then
the tenant has left and the Lower Mainland municipality changed the by-laws
to permit suites if they meet the building code for such suites.
We have now upgraded the suite to meet the code. The suite was rented out
immediatley prior to beginning the upgrade.
Somewhere I read that such an upgrade might be tax deductible as repair and
maintenance because it was required to continue providing the suite legally.
(I don't want to claim CCA so would prefer not to consider it a capital
expense.)
Question: Is this true? If not, what are my options, if any?
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david ingram replies:
What you are describing is clearly a capital expense, Repairs and
maintenance are expenses required to maintain the "status quo".
Upgrades or bringing a property into line with building codes, licencing, or
even an architectural restriction in a subdivision are clearly capital and
can only be depreciated or have capital cost allowance claimed at 4% per
year.
I am sure that someone has told you that they have deducted a similar
expense as a repair. If they did so, they got away with it for now but
could even expect to be caught up by the CCRA later on.
You can find out more by going to www.centa.com click on tax guides and then
click on rental income - there are some sample tax cases on capital versus R
& M expenses.
David Ingram of the CEN-TA REALTY Group
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
108-100 Park Royal South
West Vancouver, BC, CANADA, V7T 1A2
(604) 913-9133 - Fax 913-9123 [email protected]
www.centa.com www.david-ingram.com
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Be ALERT, the world needs more "lerts"
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