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Old 2013-08-29, 09:04 PM
PJD PJD is offline
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Default Watch out for the tax man!

For those of you thinking of doing this - you may be interested to read this article:

http://www.thestar.com/business/real..._flippers.html
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Old 2013-08-30, 06:02 PM
Mark & Lynda Mark & Lynda is offline
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Good article.

Bottom line is, if you purchase a property with the intentions of flipping it, don't take the HST rebate and be prepared to pay tax on the full gain, not just 50%.
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Old 2013-08-30, 07:48 PM
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The vast, vast majority of people affected by this are people who knew exactly what they were doing (collecting tax credits they did not qualify for and not paying taxes on income they made). It really is hard feeling sorry for them.
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Old 2013-08-30, 09:19 PM
Mark & Lynda Mark & Lynda is offline
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I think the best strategy when buying an investment property pre-construction is, rent it out for 24 months before you consider selling it. Take advantage of more appreciation, pay tax on 50% capital gains and the interest charges on the deposit prior to possession is technically tax deductible.
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Old 2013-08-31, 10:04 AM
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Is capital gains 43% of the profit you make, so say you make a profit of $100k, so you divide $100k by 2 = $50k, then from that $50k you pay 43% towards the capital gains so that comes to about $21k ? Is that right, that's what I heard before.
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Old 2013-08-31, 10:44 AM
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good summary here>> http://www.balancecounts.com/tip.php...tment-property

also there is a process for hst rebate on a new construction rental property - when we bought a new one, we paid the rebate to builder portion then requested the rebate through the other process

many years back a friend got nailed retroactively for repeated house flips - buy, renovate while living in them, then sell

people doing this with new homes are also at risk
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Old 2013-08-31, 11:18 AM
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gerapau gerapau is offline
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Quote:
Originally Posted by Selvi View Post
Is capital gains 43% of the profit you make, so say you make a profit of $100k, so you divide $100k by 2 = $50k, then from that $50k you pay 43% towards the capital gains so that comes to about $21k ? Is that right, that's what I heard before.
That depends on your marginal tax rate. If the $50k is the only income you have then you would pay less than 43% (around 31% I think). If you already have a fairly high income then the capital gains could be taxed a bit more than 43%.

This calculator gives you a good idea on the taxes you pay on income or capital gains. http://www.ey.com/CA/en/Services/Tax...3-Personal-Tax

Last edited by gerapau; 2013-08-31 at 11:21 AM.
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Old 2013-08-31, 11:16 PM
Mark & Lynda Mark & Lynda is offline
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Quote:
Originally Posted by gerapau View Post
If the $50k is the only income you have then you would pay less than 43% (around 31% I think).
31% on 50K income sounds a little high. That calculator shows the marginal rate on capital gains @ 50K is, 15.6% which is $7,800. Unless I'm interpreting it wrong.

The key is to lower your capital gain by expensing as much as legally possible, if it's a rental property, and that shouldn't be too hard to do when you consider the fees involved to buy and sell, mortgage interest, insurance, etc etc.
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Old 2013-09-01, 10:02 AM
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Quote:
Originally Posted by Mark & Lynda View Post
31% on 50K income sounds a little high. That calculator shows the marginal rate on capital gains @ 50K is, 15.6% which is $7,800. Unless I'm interpreting it wrong.

The key is to lower your capital gain by expensing as much as legally possible, if it's a rental property, and that shouldn't be too hard to do when you consider the fees involved to buy and sell, mortgage interest, insurance, etc etc.
The 31% that I mentioned is what you would pay on half of the capital gains (which is how selvi asked the question) This is the same as the 15.6% marginal rate that you mentioned.

And most of the expenses that you mentioned are "current expenses" which you would claim in the years that you have the expenses. They help offset the income that you have on the property (which is usually taxed at your marginal tax rate which would be substantially more than the 15.6% that we mention above). They don't really affect your capital gains which you would have when you sell the property.

Last edited by gerapau; 2013-09-01 at 10:08 AM.
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Old 2013-09-02, 01:36 PM
Mark & Lynda Mark & Lynda is offline
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sorry right, some of the fees I mentioned are current expenses.

There are other expenses that can lower your Capital gains. Costs of acquisition, costs of disposal.
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Last edited by Mark & Lynda; 2013-09-02 at 01:38 PM.
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