QUESTION: Hello,
I would appreciate your advice on our dilemma: About two years ago, my wife and I bought a pre-sale condo in downtown Vancouver with the view to sell our house and move to the condo on completion. The completion is expected to be just over a month from now. The problem is that we haven’t been able to sell our house (that we listed 4 months ago) at the price we (and our realtor) believe is right. We have a mortgage offer to close the condo but cannot afford to keep both properties for too long. We would be grateful if you could kindly let us know the tax consequence of each of the following situations:
1. Situation A: We move to the condo and keep the house listed until we sell it. How long do we have to sell before we incur a capital gain tax on the difference between our house’s fair market value at the time we change our principal residence to the condo and the date we sell the house? How is the fair market value determined? Is it the price at which we have listed, or a different price?
2. Situation B: We move to the condo and keep the house listed but realize after a while that we are still unable to sell it at the listed price. We then sell the condo and move back to the house. Do we have to pay capital gain tax on our gain in selling the condo?
Sincerely,
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david ingram replies:
You are caught in a classic bind of having two homes at the same time. In a falling market it is devestating to a prson's finances. In today's market , it is only mildly aggravating. But watch out and be careful. It can change overnight.
I do not know the figures for June but in may, the average time a home was on the marlet in Vancouver was just 37 days. If yours has been for sale for 120 days, it would seem to be over priced. You should have an open house for realtors and get them to leave their business card wuith the price they think it should sell for.
1. .In situatioon one above, if the house is empty for sale and it sells in a couple of months, there jjust would nto be a capital gains problem. If it took a year and real estate went up 4% this year, the tendency of the CRA would be to want to tax you on the perceived increase.
2. In 2 above, you wouold be taxable on the capital gain on the condo. NO Question.
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.
