My question is: Canadian-specific
QUESTION: David we have purchased a developed property,services to the
property line.We are not building on it at the present time, and may sell
beforehand.Is it possible to write off costs of interest and legal if we use
the property as an investment.
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david ingram replies:
Section 18(2) has allowed a full time developer "Corporation" to deduct
taxes and interest in the ordinary course of business with limitations.
There was a phase in period for five years starting in 1988. Prior to that,
the full time developer had the option of deducting the costs or adding them
to the ACB.
Section 10(1.1) allows the developer "Corporation" to add the cost of the
interest to the ACB of the land.
Note that the Corporation is supposed to be a full time developer. Part
timers need not apply and in general, interest used to buy growth shares (no
dividends paid) or gold or silver or other capital assets which do not
produce income, is not deductible or added to the ACB.
You need to talk to an accountant who works with these deals. One solution
is to incorporate and another solution would be to cash in other assets, pay
cash for the property and then use the property as security to borrow money
to buy back the equivalent assets that you sold. Then the interest is
deductible 100% against current income as opposed to being only deductible
at the equivalent of 50% against a capital gain.
This barely touched the surface by the way.
Answers to this and other similar questions can be obtained free on Air
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