My question is: Canadian-specific
QUESTION: My wife and I own and live in a condo in Vancouver. We have now
bought a house (also in Vancouver) and are planning to move in to the house
and rent out the condo. An accountant suggested we get the condo appraised
before moving to the house, but I did not quite get why - it had something
to do with capital gains. Can you give us advice as to how best to minimize
capital gains in this situation. Also, we had to pay a significant "leaky
condo" assessment when our building envelope was redone a couple of years
ago. Is there any way to offset our capital gains payable when we sell by
deducting all or part of the repair assessment?
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David Ingram replies:
Your accountant was partially correct. The appraisal is a good idea but
could be a waste of money. It is rare for the CCRA toi ask for one.
Therefore getting a good one and spending $300 or $500 for it could be a
waste.
If you do need one int he future, an appraiser can give you a value by using
public comparitive sales figures when you need it.
Still, it is certainly easier to deal with it at the time. When it is a
condominmium, the process is even easier because the location usually has
similar sales in the complex and a real value is usually easy to determine.
The leaky condo repair is of no use to you. It was done when the condo was
your principal residence. The only value that matters for future capital
gains is the value the day you moved out. Therefore, if you bought it for
$100,000 and spent $25,000 on the leaky repairs and it was worth $110,000
when you moved out and you then sold it for $150,000, you would be taxable
on $40,000 which is the net sale price less the fair market value the day
you moved out.
On the other hand, if you paid $150,000, spent another $25,000 and moved out
when it was worth $200,000 and later sold it for $160,000, you would have a
capital LOSS of $40,000. This loss can only be used against capital gains
so you should likely buy yourself a growth mutual fund to use them up.
hope this helps
David Ingram of the CEN-TA Group
US / Canada / Mexico tax and working Visa 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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