Hi David,

I recently talked to someone about claiming interest on Lines of Credit accounts and was informed there is a way, if you have more than 1 property to claim interest on your down payment money as well as the mortgage payment. It was something like splitting a line of credit into 2 accounts and 1 account is used to pay the mortgage to the bank and the other is used to have the renters pay into, effectively making your bank payments. At the end of a year load up the account that requires the bank payment from the renters payment side. I’m still a little foggy on the idea and if you could clear up the picture for me that would be great, if you’ve heard about it.

Thanks for any advise.

xxxxxxxxxxxxxxxxx
-----------------------------------
david ingram replies:



I WAS THE FIRST ONE TO PUBLISH IT BACK IN NOVEMBER, 1976 IN THE NORTH SHORE NEWS.

You can find an updated version at www.centa.com - click on the November 2001 newsletter in the top left hand box. The March 1997 newsletter deals with it as well but was updated in 2001.

------------------------
This older question will help as ell



Hi David

On your Sunday program, you keep on talking about deducting my mortgge interst. How?
If this is legal, is there a reference to the CRA Tax Act?

XXXXXXXXXX

--------------------------------------------
david ingram replies:

I am not answering many questions these days because I am swamped with tax returns with June 15th deadlines and am taking an immigration course at UBC which takes two days a week out of my life at this very busy time.

However, you are in luck. You can go to www.centa.com and read the November 2001 newsletter I fist wrote back in 1976. Updated a dozen times it gives you the answer although it does not mention Bulletin IT533 which makes it a whole lot more official. In addition, Fraser smith wrote the Smith Manoeuvre back in 1986 and, hundreds, if not thousands of people have used the two methods to make their mortgages deductible.

Why are you in luck?

Fraser Smith is Fred'a guest on the Sunday program on CKBD THIS Sunday at 9:00 AM on 600 AM in Vancovuer. Those in the rest of the country can listen live on the internet at www.600am.com. AND, If you get this in time, Thursday, youcan still call (604) 731-8900 and go to a FREE seminar t Fred's office at 1764 West 7th (corner of Burrard in the SPENCE Diamond building) at 7 PM. About one hour of a 2 1/2 hour seminar will be on deducting your mortgage interest AND Stu Rodger of ManuONE Bank will be there to talk about one of the most innovative methods of financing ever brought to Canada. ManuONE Bank is a division of MANULIFE which is bigger than the Royal Bank and the largest financial institution in Canada.


And Fred says he will give a copy of Fraser's book to the more interesing questions.

read on

The deductibility of your Canadian Mortgagfe interest depends upon what the money was borrowed for.

For instance, It is not deductible against current income if the end result is a capital gain. Therefore, if you borrow money to buy Electronic Arts stock which has never paid a dividend, the interest on the loan is not deductible agaisnt current other income.

Similarly, in the Olden days before Microsoft paid an actual dividend, the interest paid on money to buy the stock was not deductible against other income.

If you borrow money to buy vacant land, the interest is not deductible.

If you borrow money to buy Gold or silver or other precious metals, the interest is NOT dedcutible.

Usually, in the cases abvove, the interest can be added to the adjusted cost base of the item and deducted agaisnt future capital gains, but that means that only 1/2 of the interest was deducted.

Similarly, if you rent a house out with no expectation that you will make a profit "on the rental, the expenses (usually mostly interest) are not deductible against curent income

There is nothing new about this as the following cases point out.
In 1986, Ivan Glavanovic lost his claim for five years of rental losses. He had built a house for sale in 1975 and was unable to sell it. He therefore rented it out at a loss for six years. DNR turned down his losses for 1979 and 1980. Judge Tremblay of the Tax Court of Canada agreed with DNR. He ruled that the rental was not to earn income but to hold on to the property. The losses were therefore capital in nature and should be added to the adjusted cost base of the house. It was also clear that there was no reasonable expectation of profit from the rental.

Also in 1986, Kelvin Lee found the same thing. He had rented his house on an option to purchase. Judge Couture of the Tax Court of Canada ruled that the renting while holding had no expectation of profit and was not deductible.

in 1989, Virginia Maloney was turned down by Judge Mogan of the Tax Court of Canada. She had rented her house to her mother. The rent charged was not realistic with regard to the cost of and the maintenance to keep up the property. Ms Maloney had charged her mother $100 rent in 1984 with $4,600 of expenses and $1,800 rent in 1985 with $11,000 of expenses. See Special Problems below.

and in 1990, Michel-Guy Huot was also turned down for a deduction when he rented a house to his parents for less than market value. Judge Garon of the Tax Court of Canada ruled that the taxpayer "Had failed to establish that the rental expenses were incurred in order to earn income." Because of the low rent and the uncertainty of their stay, there was no "expectation of profit." (See Expectation of Profit Section at back of book for more information on this subject."

A couple of cases on expectation of profit were won by the taxpayers but OParliament plugged the wins for the future with the issuing of Bulletin IT-533 which essentially says that to deduct the interest in any one year, you must have an expectation of a rental profit sometime in the future. This expectation of a rental profit is easy to produce by projecting an increase in rents, taxes, repairs, etc and a future decrease in interest as you eventually start paying off the mrtgage. Thousands of MURBS (Multiple Unit Rental buildings) were sold with the actaul rental profits starting in the tenth or eleventh year.

You can read the bulletin here.

http://www.ccra-adrc.gc.ca/E/pub/tp/it533/it533-e.html#P138_15186

With regard to why teh interest on interest is dedcutible, I want you to pretend that the rental sat empty for three months. If you had to borrow money to pay the payments, it is clear that the interest would be dedcutible. It was a situation like this in 1974 that first tipped me off on how you coyuld make a mortgage deductible in Canada. You could also get hold of Fraser Smith's Book the Smith Manouver.

----------------------

The following is another answer to a similar question

Friday, February 18, 2005 12:11 PM


Hi David

I have read your 2001 newsletter on converting non deductible interest to deductible interest, and I am really interested in the concept.

I bought an investment rental property a little while ago, and I understand the conversion process of paying down my personal mortgage with the rental income and then borrowing back to pay the expenses. I bought the investment property with a friend, and we would both like to take advantage of converting the interest on our respective residences to the deductible kind by applying this concept. Can we legally split the rental income 50/50, apply it to our respective mortgages, and then each borrow back an equal amount to pay the investment property expenses? If not can you suggest an alternate way in which we can both convert our mortgage interest using the rental property as the conversion vehicle, and benefit equally.

Thanks in advance for your valued opinion.

Wxxxxxxxxxxxxxxx

david ingram replies:

I do not see why not.

Split the gross and take half each.

Get hold of and read Interpretation bulletin IT-533 - note that you need a cash flow projection in your paperwork that shows that you expect to make a RENTAL (not capital gain) profit in the next number of years. Seven to ten is a little long but we did a couple of thousand MURBS which did not project a rental profit until the 10th or 11th year and they were all accepted.

Read the following from a few months ago:

This is a reprint dealing with the CRA's newest bulletin on deducting interest.

==============================================
david ingram replies:


For the first time, the CCRA is clearly spelling out the rules for making mortgage interest and other interest deductible.

It is easier to deal with now.

ingram

Read the Government Bulletin at:
http://www.ccra-adrc.gc.ca/E/pub/tp/it533/it533-e.html#P138_15186

Print it out and then read my November 2001 Newsletter on the same subject at:

http://www.centa.com/CEN-TAPEDE/November_2001.htm

david ingram

The example I like best is the most abused.

Someone will borrow $1,000 to buy an investment and the interest is clearly deductible. However, if they sell the investment for less money as David Emerson did, in the past, they would try and disallow the interest on the remaining loan because there was no longer any expectation of profit. This bulletin clearly states that if you sell it for $600 and pay off $600 of the loan, the interest on the $400 remaining is still deductible even though there is no ;longer any possibility of profit.

However, if you take the $600 and buy something personal, none of the interest would be deductible in the future.

Pay attention and print it all out.

QUESTION:
Dear david:

I live in Nova Scotia, want to start on on line store. And want be able to sell onlaine anywhere.I plan to move in the future to Ontario. I was thinking of registering the business location in Ontario, because; developement of technlogy and future residence. My online store will be operated only by me and my wife. Can you answer two questions?

1. Can & should I use a Sole propiator business type for e-commerce?
2. how can I register my business now in light of my plans?

Thank you
_______________________________________________________________________________________
david ingram replies:

From right where I am sitting, since 1969 I managed to open some 700 locations in 5 provinces, 30 states and 5 countries if everything was counted.

At the moment, I operate with two municipal business licences which I only obtained in the last 24 months because up to then I did not have A BUSINESS LICENCE AT THIS LOCATION ALTHOUGH I HAD LITERALLY HUNDREDS OF BUSINESS LICENCES at other locations in other states, provinces and countries.

From this location, I deal with people around the world and I deal as a sole proprietorship.

You can get a municipal licence and operatre a web based business as a sole proprietorship anywhere. It is the simplest, cheapest and most effective way to operate.

When you move to Guelph or Toronto or Sault Ste Marie, get another municipal licence. In the meantime, your server could be anywhere. I 'think' mine is in Los Angeles at the moment but it has been all over the place.

The MAIN reason you need the municipal licence is that you will need it to get registered as a credit card vendor.

QUESTION:
>>
>> My fiance is canadian, i am from the uk but not resident in cyprus (yet).
>> Can we jointly purchase a property in Canada
>>
> ___________________________________________________
> david ingram replies:
>
Nothing stops you from purchasing a property together but the purchase
does NOT confer any right for you to live in Canada.

You will either have to marry and be sponsored to Canada or qualify on
your own. Your calling him your fiancee means that you do not qualify to
be sponsored as a common-law spouse or conjugal partner which already
qualify because they "are already married", just not formally.
.
The following older question will give you the methods of getting here if
you do not
get sponsored by an employer or a spouse.
-----------------------------


QUESTION:

I am a Canadian currently living in the UK but I need to return home in the
summer due to family commitments. My boyfriend is keen to move over with me
but we're not too sure on what we have to do. I have read that it is easiest
for me to sponsor my boyfriend (who is counted as a common law partner) for
immigration but I cant find any information to tell me if I am eligible to
sponsor him or he is eligible to be sponsored. My boyfriend is British and
I have dual Nationality between Canada and Britain.

Regards,

Cxxxxxxxxxx.
============================================
david ingram replies:

Rather than start over, I have taken another woman's similar question
answered a long time ago and reproduced it here. It should answer most of
you questions and a couple of more. In this case, the writer is already or
still in Canada

To the reader - I have taken one run-on paragraph and broken it into 14
questions. The question seems to be a second part where the first part has
gone astray but the gist of the question is clear.
-------------------------------------------------------------------------------------------

Hi,

A. What if the woman is Canadian and the man is from the UK.
There is a slightly different process than if your man was from the United
States. I have identified the brochure for you to read below at 1(a)

B. What if we want to live in Vancouver? (I live in Vancouver...the man
in question came to visit & almost stayed, but had to go back for a short
period because his father was ill.
If he comes to Canada, you can live anywhere you want without restriction if
you sponsor him into the country.

C. Does getting married ensure that he gets to stay?
Getting married does NOT ensure that he gets to stay.

D. If we marry before he comes over, will we be prevented from seeing
each other anyway?
If you marry before he gets here and he is refused admission to Canada, you
will be visiting him in the UK or meeting in the Canary Islands or Bermuda.

E. Should I get a visa & live there for a period?
No particular reason unless it was to get married there and live there for
the period it took you to sponsor him to Canada from out of the country.

F. Would his getting a job here help?
If he got a job here and a working visa, he would be here, you could get
married or not and live together or not and he could likely apply on his own
hook without your sponsoring him.

He can do a self-assessment for his ability to move on his own without your
help at 15 below.

G. Should we marry there, here or if we decided to marry somewhere else,
would it make a difference?
If he comes to Canada as a visitor and you married while he was here, he
would be "here" . If you get married out of the country, you will spend
more time apart than you want to. Technically, he would be breaking the law
by coming as a visitor with the intent of getting married and staying.

H. What if we wanted to be common-law?
Canada recognizes Common law marriages and conjugal partners. Read guide at
1(a)

I. If we marry through a church is one church preferable to another?
If the most important part of the wedding pictures is the church, some
churches are much more scenic than others. Some churches do not have enough
room for a large wedding. And some churches do not have enough parking.

J. Why do governments keep people who love one another apart?
Marrying for "convenience" (getting status in a country) is an extremely
common way for people to get into a country. My files are full of people who
married someone brought them to North America and had the "loved one"
disappear as soon as the paperwork was official.

K. Does he have to get some sort of visa to re-enter the country even if
we are married?
If you are married, the Immigration officers at the border Point or Port of
Entry will try and keep him out of the country because they will assume he
is coming here to live with you. For that he needs status.

L. How long is the visa good for?
If he comes as your spouse with your sponsoring him, his visa is for life.
If he comes as a skilled worker, it could be for a year or longer.

M. If we do get married & he is over a certain age will he still be told
you're too old & be sent back?
You can sponsor him at any age. If you get married out of the country and
want to sponsor him back, you have to prove your income is high enough to
support him and guarantee his support fro up to 10 years. If you sponsor
him from within the country, you do not need to meet the income test.

N. If that's the case, there's no point in spending the $ on a wedding
when I am in one country & he is in another is there?
True Love moves in mysterious ways. We have several clients where the wife
lives in one country and the husband in another.

O. Are you (not you, the government) telling me whom I should & shouldn't
love?
Not at all. The Government is merely enforcing its rules about just "who"
gets to live in Canada. They have expanded the rules to cover same sex
couples and common law couples where they can show a true long-term
relationship. Marriage does not ensure that the couple will stay together.
Along with yours, I received another email from a mother telling me that her
daughter's marriage had fallen apart after 8 months and she was taking down
the wedding pictures. It was a very BIG church wedding.

Thanks, SXXXXXXXXX
=========================================
david ingram replies:

It would be much, much easier on you to just find a local man. However
since you have picked someone from out of the country, you (and he) have to
conform to the rules.

You can start the process by going to:
1. http://www.cic.gc.ca/english/pdf/kits/guides/3910e.pdf
This is a guide for sponsoring a US citizen spouse into Canada. -
Publication 3910E
1(a) http://www.cic.gc.ca/english/pdf/kits/guides/3901e.pdf
This is a "different" guide used for sponsoring a UK citizen spouse into
Canada 3901E
(also for 36 other Western Europe Countries from Slovenia to Iceland (on
cover)

2. http://www.cic.gc.ca/english/pdf/kits/forms/IMM1344EA.pdf
This is the application form to sponsor - form IMM-1344A

3. http://www.cic.gc.ca/english/pdf/kits/forms/IMM1344EB.pdf
This is the sponsorship agreement - Form IMM-1344B

4. http://www.cic.gc.ca/english/pdf/kits/forms/IMM5481E.PDF
This is the Sponsorship Evaluation Form IMM-5481

5. http://www.cic.gc.ca/english/pdf/kits/forms/IMM5409E.PDF
This is a statutory declaration of a common-law marriage - FORM IMM-5409

6. http://www.cic.gc.ca/english/pdf/kits/forms/IMM5540E.PDF
This is the Sponsor Questionnaire - Form IMM-5540

7. http://www.cic.gc.ca/english/pdf/kits/forms/IMM5540E.PDF
This is an authority to release information - FORM IMM-5540

8. http://www.cic.gc.ca/english/pdf/kits/forms/IMM5491E.PDF
This is a document Checklist - Form IMM-5491

9. http://www.canadapost.ca/tools/docp/CIC/bin/hpm-e.asp
This is where you order your official receipt

10. http://www.cic.gc.ca/english/pdf/kits/forms/imm0008egen.pdf
This is your actual Application for Permanent Residence - FORM IMM-0008GEN

11. http://www.cic.gc.ca/english/pdf/kits/forms/imm0008_1e.pdf
This is your Background Declaration - FORM IMM-008_1

12. http://www.cic.gc.ca/english/pdf/kits/forms/IMM5406E.PDF
This is your additional family information - FORM IMM-5406

13. http://www.cic.gc.ca/english/pdf/kits/forms/IMM5490E.PDF
This is your spouse or conjugal partner questionnaire -= FORM IMM-5490

14. The Above PLUS a police report from your local police station (See
the guide for details) applies to those being sponsored from the UNITED
STATES or Western Europe. There is a separate brochure for every country.
If you are reading this and are from any other country (Australia, Brunei,
Austria, Venezuela, etc) goto

14 http://www.cic.gc.ca/english/applications/fc.html for other country
guides.

15. http://www.cic.gc.ca/english/skilled/assess/index.html
This is the self-assessment test for an individual to determine his or her
eligibility to immigrate to Canada without being sponsored by a spouse.

I know this will help you make your decision. If we can help you, remember,
that is what we do for a living. In particular you should goto
www.centa.com and click on and read [US/Canada Taxation] BEFORE you come.
Although specifically geared to the United States, this section contains
references to Saudi Arabia, Great Britain, Libya and shows the way Canada
taxes people from other countries. Article IV of the US / Canada Tax treaty
is also there and reads "just about" identically to another 100 + countries
that Canada has treaties with.

My question is: Canadian-specific

QUESTION: There has been a lot of discussion regarding making mortgage interest tax deductible. What is your opinion on the process known as the Smith Maneuvre?

---------------------------------------------------------------------------

david ingram replies:

This following older answer should suffice

-----------------------

My question is: Canadian-specific

QUESTION:
 What date is the archive in Centa peed for turning home mortgage interest
tax deductable
 There was a book written about it also  Who was the author?

 Thanks   I very much enjoy you column

---------------------------------------------------------------------------
david ingram replies:

The first treatise on making mortgage interest deductible ever written was
in the North Shore News in November 1976 and has been updated many times.
You can read the latest version in the Nov 2001 Newsletter in the top left
hand box at www.centa.com.

Fraser Smith wrote a book called the SMITH MANOEUVRE in 1985.  It should be
available at any book store or you can check out his website at
http://www.smithman.net/frasersmith.html

If you are in Greater Vancouver, you can attend one of Fred Snyder's Free
Thursday Seminars and /or listen to him every Sunday Morning at 9:00 AM on
www.600am.com or see him at 10:30 AM every Sunday morning on NOW TV, channel
10.

If you are on the island, Fred's associate, Ralph Hahmann also gives free
seminars on the subject at his Dundee Wealth Management office on McKenzie
Street in Victoria on Tuesday evenings.  Call Ralph at (250) 472-0700.

Every Thursday Evening, Fred Snyder of Dundee Wealth Management conducts one
of 17 different financial seminars in the boardroom of his office

Time:    7:00 to 9:30 PM
Date:    Every Thursday evening
Place    1764 West Seventh
             Vancouver (corner of Burrard)

Phone (604) 731-8900 to register

No cost - no obligation

Topics always cover mortgage interest as a deduction

other topics - getting the mortgage, estate planning, critical care
insurance, income taxation, differences between stocks and bonds, and
usually the most innovative HELOC mortgage offered in Canada from Manulife
Bank

If you are starting in downtown Vancouver and do not want to go home first,
one of the excellent THAI HOUSE restaurants is in the same building and
makes a nice start to the evening. If it is your first seminar, Fred will
buy you dinner if you are pre-registered.

I, david ingram, am sometimes at the Thursday evening following the last
Sunday of each month to cover mortgage interest as a deduction and give the
class an adding test.

QUESTION:

Have recently purchased several acres of bare land on Vancouver Island that is currently being used for hay production. My lendor cannot provide conventional mortgage as obviously there is no residence, so am stuck with a LOC @ prime. (I have the 25% down req'd for raw land). I do plan to move and build on this property in approx 4 - 5 years. In the meantime, i currently own and reside on a small acerage in the lower mainland . Question - bank suggests I should just consider this Island property an investment and therefore I can write off the mortgage interest, custom haying costs, ferry trips etc., however I am concerned about the long term ramifactions of going this route (deemed disposition when I move in etc.?) Further, the bank suggests I take the mortgage balance out on my current property, (so Island property will be paid off) which then provides two benefits. I can get a conventional mortgage at 5.1% (obviously by increasing my mortgage on my Fraser valley residence
to accomodate the Island property) and further, this method will also make my current residence mortgage interest deductible.  What do you think of these suggestions? I want to ensure I comply with the CRA certainly, but am unclear if this will fly or would even be prudent.  Love your site by the way!
____________________________________________

david ingram replies:

Do NOT take your advice from this email reply.  You need some serious consultation.

In general interest on vacant land is NOT deductible unless you are in the full time business of developping residential property. 

The 'reaon' you bought governs what it is although you can change your mind about anything.

If you bought the land to farm, interest should be dedcutible subject to hoppy farm rules.

Get hold of bulletin IT-533 and read it a dozen times for the CRA take on interest deductibility.  THEN come and talk to me or someone  like me.

 http://www.cra-arc.gc.ca/E/pub/tp/it533/it533-e.pdf

Also read my November 2001 Newsletter in the top left hand box at www.centa.com. �

QUESTION:

Hi There,

just a quick question about capital gains.  If one constructs a new house, which was used as a principal residence for 1 year, and sells after that year, are the gains taxable?  Also, I am finding articles that state the land of a principal residence can not exceed 1/2 an acre without the rest of the property being tax-exempt? 

Thanks,

________________________________
david ingram replies:


GOTO the top left hand box at www.centa.com
click on TAX Guide

click on CAPITAL GAINS for an explanation of  the history of capital gains tax.

If you built the house to sell, it does not matter if you moved in for a year or two, any profit is straight income and taxable at full ratres.  make sure you have "ALL" of your receipts for when the CRA comes calling two or three years later.

If you built the house to live in and you moved in and your circumstances changed and it became necessary to sell, it is tax free.

Land in excess of 1/2 hectare is taxable unless you could not have subdivided the lot.

You will find a good explanation and some sample tax cases in the Capital Gains Section mentioned above.

These other questions may help as well.
-----------------




My question is: Canadian-specific

QUESTION: Hi,
If we buy a fixer-upper to renovate and flip without renting it out what are the allowable expenses for deductions?
Thanks

____________________________________________________________________ david ingram replies:   In general anything you spend to do the fixing is a deduction from the final sale profit.  This would include but is not limited to:   materials, subcontractors, legal, accounting, real estate commissions, surveyors, appraisals, interest on the mortgage, interest on a building loan, interest on material loans (maybe because you used a credit card to buy), truck expenses to get supplies and transport tools, afvertising, utilities, photography, landscaping, trash removal, dumping fees, building permits, architects fees, engineering fees, home inspection fees, insurance, helpers, etc.   Remember that any profit is taxable at straight income rates on line 135.  Flipping or renovating does NOT create capital gains tax.  The following older Questions will explain that a bit.   ______________________________________________________________________ DAVID   A "friend" who is a BC realtor and has the flipping  question presented to her
from time to time  recently attended a seminar that was related to this
subject.  As a result she was able to provide me with some interesting
thoughts to ponder concerning "intent" and "professional background" when it comes to "flipping houses"
and tax in Canada.  You may possibly be looked at as a Developer all the
subsequent implications.

Read the full article at <http://tax.centa.com/comment.php?mode=view&cid=8>

----------------------------------------------------------------------------

david ingram replies:

In Canada, the purchase and sale of any piece of real estate with or without
renovations is considered a sale and subject to straight income tax unless:

1. It was bought for and clearly used as your personal residence and was
intended to be used for an indefinite period of time which is usually in the
five to ten year range.

2. It was bought as and used as a recreational property

3. It was bought for the purposes of earning long term rental income.

In the case number 1, there is no tax.

In the case of numbers 2 and 3, the sale is treated as a capital gain and
only fifty per cent of the profit is taxed at your regular tax rates.

Lots of / many (anyone caught) are taxed full tax rates when they buy a
house, move in, fix it up and sell it a year or two later and then do
another one.

Of course, most are NOT caught in these circumstances.

However, "any" flip is going to be straight income unless the person can
prove that they bought it to live in and then:

* married a person with three children and it is not big enough (had to sell
and bought bigger)

* were transferred to another city (had to sell to buy in new city)

* lost their job, were injured, etc. and can no longer afford to move in. In
this case, they would have to show that they had the finances to have paid
for it when they bought it. (Not only can they not afford it but they have
moved into their parents' basement (boomeranged).

* Inherited a house from their parents and do not need it any more. (are
living in the new house)

You can read more by going to www.centa.com - click on tax guide in the top
left hand corner and then click on the "capital gain" section.

david

This older q & A also gives an idea

My daughter is closing on a presale Yaletown condominium this summer.  She
is working until Christmas in Alberta.  She returns to Vancouver from Jan to
May and if the job becomes a full time position, then she may return to
Alberta to live.  At the time of presale, February 2004, we thought that the
suite would be assigned to her and that she would live in the suite.

I was hoping that she could declare the suite as her permanent residence
since she is only renting in Alberta and the work is not permanent.    In
May 2007, she could decide to keep or sell the suite.

What does she need to do in order to qualify the suite as her permanent
residence?

  -----------------------------------------

david ingram replies:

There is no absolute answer because you can call a toad a frog all day long
but it is still a toad.

To be a principal residence and tax free for income tax purposes, the
property must have been bought by her to live in and she HAS TO move into
it. - No exceptions that I know of.

You can expect that the CRA will be looking at "every" quick resale in EVERY
downtown building.

In deciding if it is a capital gain or a flip, the CRA will be looking at
the suitability of the unit as a residence, the ability to pay for the unit
and past and even future performance.

In other words if she claimed this one as a principal residence and then did
it again a year later, the CRA would have every right to go back and
reclassify the first one.

QUESTION:   I have a property in texas that is a house with 260 acres of land that was my primary residence for over 2 years. The entire property isunder contract of sale to a person, to be closed by 12/31/07. However this person is asking to pay/buy part of the land now because he is doing a 1031 exchange and then buy the rest before the end of the year. If I agree to sell part of it now, am I subject the CGT on the land piece being sold before the house sale ? or is it ok if it is in the same tax year and to the same person???
____________________________________--
david ingram replies: 

I sent your question off to Gary Gauvin (www.garygauvin.com) an enrolled agent (and ex-partner of mine in Ottawa, Canada) who practices just outside of Dallas.  His reply follows.  Of course, if you need professional help with this, you should get hold of Gary at [email protected]
 

Gary Gauvin wrote:

As long as the land is attached to, or surrounding the house, was used as
part of the principal residence, and is sold within 2 years before, or
after, the sale of the house, you get one exclusion. So multiple sales can
qualify for the one exemption limit of $250,000 (500,000 MFJ)

An issue is frequently how much vacant land counts. In "Bennet" an
additional 65 acres (that was not used in a business) was allowed as exempt.
Also in "Schilcher" a whole 51 acres was allowed when 7.5 acres was used for
a horse breeding business. The court note that "residential purpose" may
include appreciating nature, living in open spaces, horseback riding and
enjoying unobstructed views of the countryside. 
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Thanks Gary

QUESTION: My wife is doing a post-doct on a J1 scholar in xxxxxxxx, and I recently moved from canada to the US 3 months ago under a J2 visa. I just got a job working at a hospital down here, and noticed that I'm getting charged for social security. Looking into it furthur I think I find that I have to pay it while I'm here. Can I get a refund when I move back to canada cause if I can't claim the service I don't understand why I would have to pay into it.

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david ingram replies:

If you only earn $4,000 in one year, you might nitt get a pension.  If you earn $4,000 or more this year and over $2,000 next year, you 'will' get a retirement pension from the US in the future.

Read ON:

QUESTION:

Hi David,

I have been working in USA for last 10 years under TN visa and have been paying FICA etc in US but have not filed return to Canada until 2006.

Can I benefit from all the FICA payments later or should I find a way/if there is any way to transfer it to Canadian retirement?

Thanks


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david ingram replies:

Answered many times - just last week in fact, and reproduced here with a slight improvement suggested by Andrew Nelson
-----------------------
QUESTION: My apologies if this questions have asked many times before.I coudnt not find right and easy answer for this.
I am a Canadian citizen working in USA under TN visa for last 2 yrs. I wonder what will happen for social security tax i pay in USA.Does it goes to Canadian social security.Is it possible to get refund ?

Thanks in advance.
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david ingram replies;

The US Canada Social security Totalization Agreement means that you will be able to collect Social Security from the US when you retire whether you have 1 year ( technically 6 quarters which can be earned from July to June which is one year but if you started working on Jan 1, you would need to work 1 year and another $2,000 or so to qualify.    Fir 2007, you need $1,000 of earnings to qualify for one qhuarter.)

The actual agreement in all its glory CAN BE FOUND AT:
 http://www.socialsecurity.gov/international/Agreement_Pamphlets/canada.html

AND IS REPRODUCED HERE: 

QUESTION:

Hi, is it advantageous to setup a business then purchase a property (i have no intention of personal use). Will I be able to write off expenses such as my vehicle, my insurance, and the entire mortgage?

Thanks.

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david ingram replies;

As a rule, it is NOT beneficial to incorporate a company for the ownership of a rental property.

You can write off most expenses for a rental including the interest on a down payment loan, the mortgage and even a credit card if you use the credit card to buy something for the rental property.

You can NOT write off an office in your home for a rental property and you can not usually write off a vehicle unless you are using a truck to haul around stuff for the rental and then it would be a very small portion.

For a good description of what to write off, etc.,  go to www.centa.com and read the 'rental' secition in the Tax Guide in the top left hand box. �