Click to go to Forum Home Click to go to maXbimmer Home

Go Back   maXbimmer Forums > Misc > Off-topic
User Name
Password


Welcome to Maxbimmer.com!

You are currently viewing our boards as a guest which gives you limited access to view most discussions and access our other features. By joining our free community you will have access to post topics, communicate privately with other members (PM), respond to polls, upload content and access many other special features. Registration is fast, simple and absolutely free so please, join our community today!

Reply
 
Thread Tools Rate Thread Display Modes
Old 04-14-2011, 12:13 AM   #1
daytona
6th Gear Member
 
Join Date: Jan 2002
Location: Toronto
Posts: 2,715
Tax accountants...I need suggestions.



Me and my brother are going to be buying some property together,he has a great job and is in the high taxable bracket,Im self employed with a low salary base.I have the cash upfront for the down payments he has the strong credit references for loans I dont since Im self employed and pull a small salary from the business.If we collect rent from the investments what is best way to structure it so we pay less taxes.I figure Im in the low scale of taxable income it be best its under my name or a number company name since I have space in my yearly income cap to absorb any additional investment revenue.How should we design this to avoid getting hit with capital gain taxes?...PM me if you want.
__________________
.Never banned but came very close..three times
daytona is offline   Reply With Quote
Old 04-14-2011, 06:56 AM   #2
marek
5th Gear Member
 
Join Date: Aug 2004
Location: California
Posts: 932
You will only pay capital gains taxes when you sell the property. Otherwise it will be rental income, which just gets added to your overall income and you can write off all expenses mortgage interest/property tax/utilities/cost of advertising to find tenants/utilities/repairs etc.
marek is offline   Reply With Quote
Old 04-14-2011, 08:31 AM   #3
daytona
6th Gear Member
 
Join Date: Jan 2002
Location: Toronto
Posts: 2,715
should the property by listed under both names or just one...he be the "co signer" of the loan.....can I write off the maintenance charges if its a condo?...should we create a number company or is really isnt a huge savings by doing so?..
__________________
.Never banned but came very close..three times
daytona is offline   Reply With Quote
Old 04-14-2011, 11:35 AM   #4
MiroE36
6th Gear Member
 
MiroE36's Avatar
 
Join Date: Nov 2008
Location: Toronto
Posts: 1,896
You gotta give a little more fact before you can get quality advice. How much are you financing? Will your expenses cover substantially all of your income? Since you mentioned condo, I would assume less than 1/2 million and depending on how much is financed my guess would be somewhere around 10,500 in interest and about 3000 in maintenance (condo fees) probably around 2-3k in property taxes, plus some travel allowance for whoever does the collection and advert and shit like that. Most condo's (dependin on the location and size) rent out between 1400-1800. Therefore you're pretty much breaking even. Furthermore, don't take any CCA on the property so you're not hit with recapture in the future and your good. A number company is not advisable in this situation. As car as co-tenancy, you can make it 75/25 in your favour to save some tax now, but you'll be hit with the capital gains tax at 75/25 as well in the future, so determine your short term savings over long-term loss.
__________________
1992 325i / Briliant rot - SOLD @ 301,000km
1998 318is / Arktic silber - SOLD @ 207,000km
2007 335i / Jet Black - CURRENT @ 28,000 km

MiroE36 is offline   Reply With Quote
Old 04-14-2011, 12:15 PM   #5
propr'one
op sucks cock
 
propr'one's Avatar
 
Join Date: Jun 2004
Location: T.
Posts: 17,772
Send a message via MSN to propr'one
^can you futher explain why you think incorporating is a bad idea? They could save taxes on all their expenses by claiming them and paying less tax from the rental profits. It also protects their credit (somewhat) if the deal goes wrong.
__________________
I run a canadian HID kit company, if you have any questions about hid kits in canada or would like to check out our products please contact me here: http://absolutehid.ca

Hot: 2001 Estoril M RoadsterZCP 19's michelin supersports, ZHP knob, JL 8W3
Cold: 2002 TiAg M3 6mt ZCP 19's michelin supersports, deoranged, dechromed, led tails, ZHP knob, UUC SS v3, GROM, OEM 18's w310's,
fun: 2006 YZF-R6, black
propr'one is offline   Reply With Quote
Old 04-14-2011, 12:23 PM   #6
daytona
6th Gear Member
 
Join Date: Jan 2002
Location: Toronto
Posts: 2,715
Miro we actually crunch the numbers and not worry about the ability to do this,we're just wondering what is the best way to structure the future gains and extra income to avoid the least amount of taxes at the end of the year.Capital gain tax cant be avoided when we sell but we were more worry about the rental income affect on our yearly income taxes.Im was thinking about putting everything under my name since even with a income rental stream I still be a bit less than he makes in a year.I know my brother refusing any overtime since if he work those hours he be in the "terror zone" of taxes.
__________________
.Never banned but came very close..three times
daytona is offline   Reply With Quote
Old 04-14-2011, 01:59 PM   #7
sirex
King Sirex
 
Join Date: Aug 2002
Location: Toronto
Posts: 9,846
You cant claim travel expenses for doing collection. You can claim travel expenses if they are incurred while you travel to the property to do maintenance to it your self. If you are already paying maintenance fees to the condo, then you will be hard pressed to claim further expenses.

As far as I know it really doesn't matter who the income goes to. So, if the rental income is going to you, then you will claim it as income. You can then subract expenses: interest that you pay on the mortage, and other such fees.

Common sense. Its obvious the person with the lower income bracket should claim the income. Except that you should expect to pay income taxes at the end of the year - to the tune of a few thousand dollars, depending on how many expenses you can deduct. If youre making $30,000 now, and youre forseeing 25,000$ in income from the rental property, its quite simple your new income will be 55,000$. Then hopefully when you subract interest, condo maintenance fees (assuming you pay it), utility fees (if you pay it), etc, maybe you can reduce it a bit.

The other thing that you can do is depreciate the property value to 5% per year off the market value of the dwelling. But, the problem with this is that as you depreciate it, it will increase your capital gains when you sell it, but you will get a really good short term deduction on your taxes.
e.g. dwelling is worth 300,000, you depcrciate it and in x years its worth 200,000 in value, but you then sell the property for 600,000, so you would have to claim 400,000$ as gain, rather than only 300,000


Quote:
Originally Posted by MiroE36 View Post
You gotta give a little more fact before you can get quality advice. How much are you financing? Will your expenses cover substantially all of your income? Since you mentioned condo, I would assume less than 1/2 million and depending on how much is financed my guess would be somewhere around 10,500 in interest and about 3000 in maintenance (condo fees) probably around 2-3k in property taxes, plus some travel allowance for whoever does the collection and advert and shit like that. Most condo's (dependin on the location and size) rent out between 1400-1800. Therefore you're pretty much breaking even. Furthermore, don't take any CCA on the property so you're not hit with recapture in the future and your good. A number company is not advisable in this situation. As car as co-tenancy, you can make it 75/25 in your favour to save some tax now, but you'll be hit with the capital gains tax at 75/25 as well in the future, so determine your short term savings over long-term loss.

Last edited by sirex; 04-14-2011 at 02:02 PM.
sirex is offline   Reply With Quote
Old 04-14-2011, 10:35 PM   #8
daytona
6th Gear Member
 
Join Date: Jan 2002
Location: Toronto
Posts: 2,715
Sirex thanks thats what I was thinking and was told by my accountant but he really is only a bookeeper in my eyes.He doesnt really help me to get around taxes he just balances the books...
__________________
.Never banned but came very close..three times
daytona is offline   Reply With Quote
Old 04-14-2011, 11:23 PM   #9
slemmer
Driving in the fast lane
 
slemmer's Avatar
 
Join Date: Dec 2002
Location: Missed in 'sauga
Posts: 3,000
If you're putting the property in the names it's better to have both names on the deed with rights to survivorship.
__________________

'04 645cic
'05 GMC Sierra SLT Z71 CCSB 4x4
'00 740i Sport
slemmer is online now   Reply With Quote
Old 04-15-2011, 08:52 AM   #10
daytona
6th Gear Member
 
Join Date: Jan 2002
Location: Toronto
Posts: 2,715
So the property I can register both names on it but I can have all the income directed into my name?...
__________________
.Never banned but came very close..three times
daytona is offline   Reply With Quote
Old 04-15-2011, 09:30 AM   #11
sirex
King Sirex
 
Join Date: Aug 2002
Location: Toronto
Posts: 9,846
There is actually a website that has all the information about deductions and how rental properties work. It's not that much reading.

Honestly, the only way around the taxes is through trumped up expenses - which you have to be mindful about because you could be audited.

Also, we own a rental property. It's in my parents name, but only my mother collects the income from it - shes in a lower tax bracket - haven't had any problems with that. But I m not entirely sure how that works for other people other than spouses. I am pretty sure the government doesn't care so long as 1 of the persons is paying taxes. Actually we were thinking as placing myself as the person whom the income was going to, but unforntunately all the rent cheques were in my mothers name.

Last edited by sirex; 04-15-2011 at 09:33 AM.
sirex is offline   Reply With Quote
Old 04-15-2011, 09:42 AM   #12
daytona
6th Gear Member
 
Join Date: Jan 2002
Location: Toronto
Posts: 2,715
What the website sirex?..of course under two names means capital gain tax is paid by both co owners.
__________________
.Never banned but came very close..three times
daytona is offline   Reply With Quote
Old 04-15-2011, 11:10 AM   #13
sirex
King Sirex
 
Join Date: Aug 2002
Location: Toronto
Posts: 9,846
do some searching on CRA (canada revenue agency). It can be a bitch to navigate though.

Im not sure about capital gain tax being paid by both owners at sale.

E.g. if you bought at 100,000$ and sold at 200,000$
100,000 - 200,000 = 100,000
You would only pay capital gains tax on 50% of that 100,000$, so only $50,000 would be taxed at your marginal rate, which of course would bump your tax rate to probably the highest level. But if there is 2 of you and its split then you would only pay tax on 1/2 of that 50,000.

http://www.cra-arc.gc.ca/E/pub/tg/t4...tml#P279_29831

Alot of info there. I think in your situation - though I cant find a specific example, or a specific quote - it just falls under partnership when you and your brother buy a property together. Therefore what you pay is determined by your stake in the ownership that the two of you decide on. But then if you do that, you might have to split in the rental income by that percent as well in case you got audited - as well as expenses.

Last edited by sirex; 04-15-2011 at 11:18 AM.
sirex is offline   Reply With Quote
Old 04-18-2011, 04:22 PM   #14
MrRWD
2nd Gear Member
 
Join Date: Jun 2010
Location: Markham
Posts: 240
Quote:
Originally Posted by sirex View Post
You cant claim travel expenses for doing collection. You can claim travel expenses if they are incurred while you travel to the property to do maintenance to it your self. If you are already paying maintenance fees to the condo, then you will be hard pressed to claim further expenses.

As far as I know it really doesn't matter who the income goes to. So, if the rental income is going to you, then you will claim it as income. You can then subract expenses: interest that you pay on the mortage, and other such fees.

Common sense. Its obvious the person with the lower income bracket should claim the income. Except that you should expect to pay income taxes at the end of the year - to the tune of a few thousand dollars, depending on how many expenses you can deduct. If youre making $30,000 now, and youre forseeing 25,000$ in income from the rental property, its quite simple your new income will be 55,000$. Then hopefully when you subract interest, condo maintenance fees (assuming you pay it), utility fees (if you pay it), etc, maybe you can reduce it a bit.

The other thing that you can do is depreciate the property value to 5% per year off the market value of the dwelling. But, the problem with this is that as you depreciate it, it will increase your capital gains when you sell it, but you will get a really good short term deduction on your taxes.
e.g. dwelling is worth 300,000, you depcrciate it and in x years its worth 200,000 in value, but you then sell the property for 600,000, so you would have to claim 400,000$ as gain, rather than only 300,000
You're income does go from $25,000 to $55,000.

You mention loans... so you have to calculate your net income.

simple equation.

net income = Rent - mortgage_interest - condo_fees - utils - (sum of maintenances/repairs). - accounting/legal fees etc.

... in general, most rental incomes with a mortgaged house is probably $3000-$5000. It's probably won't make much off a difference in your income tax.

Don't depreciate your house through the years... it will kill you when you sell the house. Not worth it... you either pay now... or pay later... but you will pay.

Your brother can pay you 10% of your rental income to manage the property....

It's best to split it 50/50 in terms of ownership, income etc.
MrRWD is offline   Reply With Quote
Old 04-18-2011, 04:24 PM   #15
MrRWD
2nd Gear Member
 
Join Date: Jun 2010
Location: Markham
Posts: 240
Quote:
Originally Posted by daytona View Post
should the property by listed under both names or just one...he be the "co signer" of the loan.....can I write off the maintenance charges if its a condo?...should we create a number company or is really isnt a huge savings by doing so?..
numbered company is great, but harder to get a mortgage. It's most likely commercial mortgage then.

.. liability wise... a numbered company is great..

once you have three houses... it's a true business.. worth INC yourself.
MrRWD is offline   Reply With Quote
Reply

Thread Tools
Display Modes Rate This Thread
Rate This Thread:

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is On

Forum Jump


All times are GMT -4. The time now is 02:08 PM.


Powered by vBulletin® Version 3.8.1
Copyright ©2000 - 2015, Jelsoft Enterprises Ltd.
Maxbimmer Copyright 2001 - 2015