Capital Gains DAQ

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nobbie48

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DAQ = Dumbazz Question, possibly like "Can I put my R bike in my grandfather's name."

Can you sell part of an item to spread the tax hit over a couple of years?

John Doe buys a cottage 30 years ago for $100,000 and now it's worth $600,000, a cap gain of $500,000 and has to pay tax on half so $250,000 gets added to his income and he gets reamed.

If he sold half ownership to someone for $300,000 his cap gain would be $250,000 and the percentage would drop. He gets to use the cottage from August 1 to July 31 the next year and the partner gets it from August 1 to July 31 the next. Everyone gets a half summer and they alternate getting winters. He still gets reamed but not as badly. A lot depends on other income.

Could he sell the half to his son or does there have to be arm's length.
 
I would run it by your tax attorney or accountant. My guess is it wouldn't be allowed, but I'm not either.
 
Tried something similar with our parents cottage. Basically someone’s got to pay the bill.

If it’s not my parents, it’ll be me if I get it signed over. You can pay the bill over 4 years IIRC….but someone’s got to pay it.

We can’t figure out how to transfer ownership. Only way would be to ‘buy’ it off the parents, and we just simply pay their tax bill on it so they end up free and clear.

Bought for 70k 20 odd years ago.

Probably worth 700k right now FMV…maybe 600 but I doubt it.

So 630k in capital gains, 315k gets added to your income….and you end up with a bill for 160k plus or minus.

I could make it work lol.
 
It's taxed at your nominal rate. So is that the low percentage you'd have being retired being applied to that amount (the gain) or does that amount bump you into a higher percentage?
 
Defer and delay

Max out your rrsp and see if you can use spousal rrsp if your wife has room or makes less than you

Down the road, you can use your gains at a much lower tax rate

Either way, talk to a good accountant to come up with a plan
 
timtune said:
It's taxed at your nominal rate. So is that the low percentage you'd have being retired being applied to that amount (the gain) or does that amount bump you into a higher percentage?
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If the cap gain is $500,000 you get half that added to your income. If you make a modest $80 K normally your income that year would show as $330,000 and they would scoop a little less than half. The tax rate is a semi exponential rate with the % rising in steps. X dollars for the first so much, Y dollars for the next so much, Z dollars for the next etc.

In the case of a estate the RRSP or RIF is considered cashed in the day before the death so a person with an RRSP / RIF and a cottage gets them added together. Ouch. This is when estate planning comes into it.
 
SunnY S said:
Defer and delay

Max out your rrsp and see if you can use spousal rrsp if your wife has room or makes less than you

Down the road, you can use your gains at a much lower tax rate

Either way, talk to a good accountant to come up with a plan
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Accountant and estate lawyer have VERY differing opinions of how to do this properly to minimize tax. I've got a meeting with our new lawyer to create the will and will then ask that question as well to see what he says is the best way to proceed.
 
Some countries you can buy shelf companies with capital loss, transfer assets to the company then sell asset and offset the capital gains with the companies capital loss. Don't know if Canada allows this.

I think canada has a 800k company capital gains exemption. Make a company, sell the property to the company for cheap. Then when it's time to sell it from the company claim the capital gains exemption

Talk to your accountant.
 
The real estate developers apparently do something liker this which is why you see signs , Ironstone homes by XXX developement , they loan money between 'companies' , at shelter tax obligations for years. Its all paybable eventually .

Unless there is a LOT of money involved , ( and to be fair what is a LOT of money to one fellow is pocket change to another) , you'll spend as much in legal and lawyer fees, setting up and registering accounts as you may save in the long run.
Pay your taxes LOL
 
crankcall said:
The real estate developers apparently do something liker this which is why you see signs , Ironstone homes by XXX developement , they loan money between 'companies' , at shelter tax obligations for years. Its all paybable eventually .

Unless there is a LOT of money involved , ( and to be fair what is a LOT of money to one fellow is pocket change to another) , you'll spend as much in legal and lawyer fees, setting up and registering accounts as you may save in the long run.
Pay your taxes LOL
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Theoretically. I have seen some interesting money shifting from some developers. You can move the money to kids for instance by selling them the land cheaply and then their company gets the profit. Legal, large scale income splitting.
 
Google Libfeld Bros. Torontos billionaire developers written up in Toronto Life magazine on how to shuffle tax obligations and how it works out when one party gets sour,

pay your taxes folks LOL
 
nobbie48 said:
DAQ = Dumbazz Question, possibly like "Can I put my R bike in my grandfather's name."

Can you sell part of an item to spread the tax hit over a couple of years?

John Doe buys a cottage 30 years ago for $100,000 and now it's worth $600,000, a cap gain of $500,000 and has to pay tax on half so $250,000 gets added to his income and he gets reamed.

If he sold half ownership to someone for $300,000 his cap gain would be $250,000 and the percentage would drop. He gets to use the cottage from August 1 to July 31 the next year and the partner gets it from August 1 to July 31 the next. Everyone gets a half summer and they alternate getting winters. He still gets reamed but not as badly. A lot depends on other income.

Could he sell the half to his son or does there have to be arm's length.
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On the sale of 1/2 to avoid taxes -- not likely.

It's not that simple when you're dealing with capital gains on long-held real estate. Did John only own the cottage (and no other real estate) for any portion of the 30 years? Did John make any capital improvements over the years (additions, outbuildings, docks etc.)? Is any portion of the property subject to depreciation?

John needs a tax lawyer.
 
lawyers are generally despised and accountants are mostly made fun of. How much would you have to hate yourself to become a tax lawyer.

Edit; just found out what a downtown TO tax lawyer bills per hr. Party on nerds
 
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Mad Mike said:
On the sale of 1/2 to avoid taxes -- not likely.

It's not that simple when you're dealing with capital gains on long-held real estate. Did John only own the cottage (and no other real estate) for any portion of the 30 years? Did John make any capital improvements over the years (additions, outbuildings, docks etc.)? Is any portion of the property subject to depreciation?

John needs a tax lawyer.
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It's been a personal getaway for close to 30 years. He's spent money on it but no walls have moved. The windows have been upgraded but that is just normal personal ownership stuff. He's never rented the cottage for income.
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