Q. My family lived for many years in a house in Toronto finally leaving in November 2011. It is currently (May 2012) being rented out. We are now renting property in BC and are planning to buy here and sell the Toronto home. Will we be subject to any capital gains tax? If one of us goes back and lives there after the rental period ends will we avoid any tax? If so, how long would we need to stay there
A. The day the LEGAL OWNER stopped living in the house as his/her/their principal residence, they are deemed to have disposed of and reacquired the house at fair market value. You should keep a record of the FMV of the house on that date, the Conversion date.
See http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/rprtng-ncm/lns101-170/127/rsdnc/menu-eng.html?=slnk
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/rprtng-ncm/lns101-170/127/rsdnc/chngs/menu-eng.html
Selling the rental house, or deciding to make it your principal residence again, is a SECOND disposition and triggers the calculation of capital gain and possibly a final loss based on this Adjusted Cost Base on the Conversion date.
You will need to account for Capital Cost Allowance, and perhaps recapture it. Read the Rentalk Guide again cover to cover:
http://www.cra-arc.gc.ca/E/pub/tg/t4036/README.html
Especially Chapters 3 and Chapter 4.
Finally note that "one of us" needs to be the legal owner of the property that reestablishes principal residence. If a family member starts living there who is not the legal owner, this is either considered a non-arm's-length rental at zero-cost, or the owner can gift the other family member the house. Either way, there will be a disposition of the house that triggers cap gain.
Also note that the change in market value from Nov 2011 to present is likely small, and may even be a LOSS once you factor in agency commissions.
See http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/rprtng-ncm/lns101-170/127/rsdnc/menu-eng.html?=slnk
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/rprtng-ncm/lns101-170/127/rsdnc/chngs/menu-eng.html
Selling the rental house, or deciding to make it your principal residence again, is a SECOND disposition and triggers the calculation of capital gain and possibly a final loss based on this Adjusted Cost Base on the Conversion date.
You will need to account for Capital Cost Allowance, and perhaps recapture it. Read the Rentalk Guide again cover to cover:
http://www.cra-arc.gc.ca/E/pub/tg/t4036/README.html
Especially Chapters 3 and Chapter 4.
Finally note that "one of us" needs to be the legal owner of the property that reestablishes principal residence. If a family member starts living there who is not the legal owner, this is either considered a non-arm's-length rental at zero-cost, or the owner can gift the other family member the house. Either way, there will be a disposition of the house that triggers cap gain.
Also note that the change in market value from Nov 2011 to present is likely small, and may even be a LOSS once you factor in agency commissions.
What happens to an eviction, when the owner doesn't own the home anymore?
Q. I was evicted from the house I was renting. However, the property is to be auctioned off a couple of days later. Whether the bank takes the house back, or someone buys it at the auction; if I work out a deal with the new owner, and they agree to let me continue to stay, what happens with the eviction?
What about if I buy the property at the auction, does the eviction still stands?
What about if I buy the property at the auction, does the eviction still stands?
A. outstanding questions;
a; You mean to say you have been given eviction papers. IF you had
been evicted, you would no longer be there.
b; if you can make arrangements with the new owner, you can stay.
c; if you wind up buying the property, then you can re-lease to yourself, of course.
the sequence of eviction is;
a. notice to pay or quit--3-5 days depending on your state
b. if no pay, landlord -owner, MUST go to small claims
or its equiv and get a judgment in his behalf against the
non paying tenant. if the tenant is ready [have a cashier's check
available to cover all rent and past due interest and penalty
fees listed in the lease agreement] to pay the rent, the judge
will accept it and the eviction lawsuit goes away and the tenant
is back to being a good tenant.
c; if the tenant does not pay, the LL must return to court after
5-10 days, and gets a detainer judgment which is taken to
the sheriff where the LL pays a fee for service and the
next day or two, the sheriff comes to remove the tenant.
---------
leases go with property. if you are able to buy the property then
your bad lease [non paying tenant] goes with the property.
it is then considered a different asset because you would
need x tenants to pay the loan needed to take control of the property.
-----
if you become the owner, you can stop any eviction against
yourself since that is the right of any LL against any tenant
who is in arrears.
i hope that explains things well. I am available to guide you further.
a; You mean to say you have been given eviction papers. IF you had
been evicted, you would no longer be there.
b; if you can make arrangements with the new owner, you can stay.
c; if you wind up buying the property, then you can re-lease to yourself, of course.
the sequence of eviction is;
a. notice to pay or quit--3-5 days depending on your state
b. if no pay, landlord -owner, MUST go to small claims
or its equiv and get a judgment in his behalf against the
non paying tenant. if the tenant is ready [have a cashier's check
available to cover all rent and past due interest and penalty
fees listed in the lease agreement] to pay the rent, the judge
will accept it and the eviction lawsuit goes away and the tenant
is back to being a good tenant.
c; if the tenant does not pay, the LL must return to court after
5-10 days, and gets a detainer judgment which is taken to
the sheriff where the LL pays a fee for service and the
next day or two, the sheriff comes to remove the tenant.
---------
leases go with property. if you are able to buy the property then
your bad lease [non paying tenant] goes with the property.
it is then considered a different asset because you would
need x tenants to pay the loan needed to take control of the property.
-----
if you become the owner, you can stop any eviction against
yourself since that is the right of any LL against any tenant
who is in arrears.
i hope that explains things well. I am available to guide you further.
What taxes a foreign national has to pay in his rental property?
Q. I have a friend that bought a property in Florida for investment and wants to know how much in taxes he would have to pay due to the rent income.
A. US source income rental property that was bought in Florida for this purpose.
And we can ALL make a GUESS and what amount would you guess that the taxes would have to be that your foreign national friend will have to pay on this rental income for the tax year.
Publication 519 (2011), U.S. Tax Guide for Aliens
http://www.irs.gov/publications/p519/index.html
Chapter 2 Rents or Royalties
Your U.S. source income includes rent and royalty income received during the tax year from property located in the United States or from any interest in that property.
U.S. source income also includes rents or royalties for the use of, or for the privilege of using, in the United States, intangible property such as patents, copyrights, secret processes and formulas, goodwill, trademarks, franchises, and similar property.
Real Property
Real property is land and buildings and generally anything built on, growing on, or attached to land.
Gross income from sources in the United States includes gains, profits, and income from the sale or other disposition of real property located in the United States.
Hope that you find the above enclosed information useful. 05/17/2012
And we can ALL make a GUESS and what amount would you guess that the taxes would have to be that your foreign national friend will have to pay on this rental income for the tax year.
Publication 519 (2011), U.S. Tax Guide for Aliens
http://www.irs.gov/publications/p519/index.html
Chapter 2 Rents or Royalties
Your U.S. source income includes rent and royalty income received during the tax year from property located in the United States or from any interest in that property.
U.S. source income also includes rents or royalties for the use of, or for the privilege of using, in the United States, intangible property such as patents, copyrights, secret processes and formulas, goodwill, trademarks, franchises, and similar property.
Real Property
Real property is land and buildings and generally anything built on, growing on, or attached to land.
Gross income from sources in the United States includes gains, profits, and income from the sale or other disposition of real property located in the United States.
Hope that you find the above enclosed information useful. 05/17/2012
What would a landlord raise the rent to on a $40 000 improvement?
Q. We bought a commercial property with two shops on it. A potential tenant wants us to hook up water and sewer and build a bathroom in the second shop. I was wondering what we would charge extra for rent to pay for the renovation? They have not signed a lease agreement as of yet.
A. Without knowing your market, this is impossible to answer. Need to know what similar properties with these facilities are renting for. I am not suggesting you need to match such prices, but not be out of the neighborhood. Plus there are other issues to consider like the length of the lease and solvency of the prospective tenant. I suggest you have a local commercial realtor lease the space for you and guide you in this process.
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