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Name: Nichol
the_email: Nichol at Cymat.com
My question is: Canadian-specific
QUESTION: Me and a friend bought a house in bad condition 8 months ago. We
both fixed the house up and he is currently living in the house. He now
needs to move for personel reasons. When we sell the house we will have a
profit due to the repairs and market conditions. Will the profit be capital
gains or income. Can he or I use the principle residency clause to avoid
taxes? I'm married and live in another house that I own. He does not own
any other property. Neither of us is a contractor or has ever sold a house
before.
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david ingram replies:
If you guys were putting the house together to sell, it is straight income
to both of you even if he lived in it while you remodelled it and it was the
first one done.
If you put the house together with the genuine belief that it was to be his
residence for ten years and something has happened that means he cannot stay
there, then it is tax free to him and a capital gain to yourself.
The answer will likely be found in the mortgage papers at the bank.
* If the bank put down that you were buying this to remodel and sell and
gave you a builder's mortgage, then it is straight income to both of you.
* If, on the other hand, it was a five year closed mortgage, it would
indicate it was intended to be a residential house and be tax free to your
friend.
Answers to this and other similar questions can be obtained free on Air
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at
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