Canadian Realestate Magazine forum is the place for positive industry interaction and welcomes your professional and informed opinion.

Capital Gain or Income on Sale of Rental Property

Notify me of new replies via email
wwwKris | 30 Sep 2016, 08:48 AM Agree 0
I've been doing some reading on tax handling when you sell a rental property. My understanding is that CRA will treat the sale: (1) As income taxed at your marginal tax rate or (2) As a capital gain where 50% of the profit is tax exempt.

From a tax standpoint, (2) seems like the best scenario because 50% of the profit is tax exempt but one of the books that I read said the following: "[Would] it be better to claim capital gains? Not necessarily! Due to tax rate differences between individuals and corporations, plus the different types of income from a tax perspective, some investors may at times prefer to treat their profits as income."

Does anyone have any thoughts on this? Under what scenarios might someone want to have the sale taxed as income?
  • CPA | 10 Oct 2016, 01:20 PM Agree 0
    Hi,

    Try watching this video.

    https://www.youtube.com/watch?v=pWSJ_YlEkYQ
  • | 11 Nov 2016, 11:37 AM Agree 0
    Thank you for the response CPA. The video was very informative in terms of how capital gains is calculated at the time of sale - thanks. Perhaps I missed something, but it didn't answer the question for me in terms of why someone might want to have the profit classed as income which is 100% taxable in the year of the sale rather than having it classed as a capital gains which is 50% taxable.

    Again, this came from a real estate book that I'm reading which said: "Due to tax rate differences between individuals and corporations, plus the different types of income from a tax perspective, some investors may at times prefer to treat their profits as income."

    I'm not an accountant, which may definitely be the source of my lack of understanding :), but I'm struggling to see any scenario where having it treated as a capital gains and therefore only be 50% taxable wouldn't be a good idea.
  • Raj | 05 Jan 2017, 10:56 PM Agree 0
    Hi

    Is there any clarification on CRA website, I have been trying to find?

  • chakkaravarthy | 21 Jan 2017, 11:40 AM Agree 0
    Dear Partner/Associate.

    We have direct and efficient providers of Bank Guarantee (BG), Insurance Guarantees, MTN, Confirmable Bank Drafts, Standby Letters of Credit (SBLC) and Third Party Guarantees. If you are a potential Investor or Principal looking to raise capital, we will be happy to answer any questions that you have about this opportunity and to provide you with details regarding these services.

    Our BG/SBLC Financing can help you get your project funded, by providing you with yearly renewable leased bank instruments. We work directly with the providers of these instruments. Leased Instruments can be obtained at minimal costs to lessor compared to other banking finance options. This offer is open to both individuals and corporate bodies.

    The Financial institution can finance your signatory projects such as Real Estate Development, Aviation Service, Agriculture Finance, Petroleum Importation, Telecommunication, construction of Dams or Bridges and all kind of projects., we fund 100% of the face value of the financial instrument.
    Inquiries from agents/ brokers/ intermediaries are also welcome.

    If you are interested in seeking to raise finance for your business/projects in this way, please contact me for more information.


    Regards
    Chakkaravarthy Munuswamy

    Contact : Chakkaravarthy Munuswamy
    Email ID: chakkaravarthy.finance@gmail.com
    Skype ID:chakkaravarthy.finance
  • Emily | 27 Jun 2017, 01:47 AM Agree 0
    The other 50% of the taxable gain may be at the high personal rate and may be so high that it's greater than 100% tax at the lower small business income tax rate (for a ccpc as an example).
Post a reply