Comments on: Structuring Your Stocks and Real Estate Investments: Some Considerations, Part I http://www.thickenmywallet.com/blog/wp/2007/05/08/investing-in-stock-and-real-estate-saving-taxes-other-considerations/ Everything to do with thickening your wallet by entrepreneur turned President of an Investment Company Wed, 17 Mar 2010 13:21:25 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: admin http://www.thickenmywallet.com/blog/wp/2007/05/08/investing-in-stock-and-real-estate-saving-taxes-other-considerations/comment-page-1/#comment-9059 admin Wed, 16 Apr 2008 00:28:04 +0000 http://www.thickenmywallet.com/blog/wp/?p=31#comment-9059 It depends on the situation but I can't find an exemption which would allow a deferral of LTT in the situation you described. It depends on the situation but I can’t find an exemption which would allow a deferral of LTT in the situation you described.

]]> By: PC http://www.thickenmywallet.com/blog/wp/2007/05/08/investing-in-stock-and-real-estate-saving-taxes-other-considerations/comment-page-1/#comment-8949 PC Sat, 12 Apr 2008 18:38:05 +0000 http://www.thickenmywallet.com/blog/wp/?p=31#comment-8949 Hello, When you move your real estate holdings into a corporation, do you have to pay the appropriate land transfer tax in Ontario, Or can you make an application for an exemption? It does make sense that you pay yourself a tax on this type of transaction. Thank You. Hello,

When you move your real estate holdings into a corporation, do you have to pay the appropriate land transfer tax in Ontario, Or can you make an application for an exemption? It does make sense that you pay yourself a tax on this type of transaction.

Thank You.

]]> By: admin http://www.thickenmywallet.com/blog/wp/2007/05/08/investing-in-stock-and-real-estate-saving-taxes-other-considerations/comment-page-1/#comment-34 admin Mon, 14 May 2007 21:56:47 +0000 http://www.thickenmywallet.com/blog/wp/?p=31#comment-34 QC Landlord: Ok- I think I see what you are driving at. In the tax form for previous years, you cannot redistribute your expenses to non-deductible items. However, most mortgages allow you to increase your bi-weekly/monthly payments which means that you are paying more towards principal than interest. It is this increase in the mortgage payments that I am speaking about. So in your example, you increase your mortgage payments (which is usually applied in greater portion to principal than interest) and increase the non-deductible expense. Is that clear? QC Landlord:

Ok- I think I see what you are driving at. In the tax form for previous years, you cannot redistribute your expenses to non-deductible items.

However, most mortgages allow you to increase your bi-weekly/monthly payments which means that you are paying more towards principal than interest. It is this increase in the mortgage payments that I am speaking about. So in your example, you increase your mortgage payments (which is usually applied in greater portion to principal than interest) and increase the non-deductible expense.

Is that clear?

]]> By: Weekend Reading - May 12, 2007 - Million Dollar Journey http://www.thickenmywallet.com/blog/wp/2007/05/08/investing-in-stock-and-real-estate-saving-taxes-other-considerations/comment-page-1/#comment-29 Weekend Reading - May 12, 2007 - Million Dollar Journey Sat, 12 May 2007 12:06:43 +0000 http://www.thickenmywallet.com/blog/wp/?p=31#comment-29 [...] ThickenMyWallet has a great article explaining tax considerations when structuring your real estate and stock assets. [...] [...] ThickenMyWallet has a great article explaining tax considerations when structuring your real estate and stock assets. [...]

]]> By: QCLandlord http://www.thickenmywallet.com/blog/wp/2007/05/08/investing-in-stock-and-real-estate-saving-taxes-other-considerations/comment-page-1/#comment-26 QCLandlord Fri, 11 May 2007 04:25:32 +0000 http://www.thickenmywallet.com/blog/wp/?p=31#comment-26 As you are saying, mortgage principal is not deductible, so when you fill your tax forms, you simply cannot create a business loss by increasing your principal. e.g.: rental income: 20K interest on mortgage: 10K principal on mortgage: 4K maintenance expenses: 2K utilities: 1K insurance: 1K property taxes: 3K In this case, even though your expenses are greater than what you earn, you'll still have a taxable income of 3K (20-10-2-1-1-3). Hey, I'd like to do it myself, but the rules are really clear and simple. Any accountant in here with more info on this subject? As you are saying, mortgage principal is not deductible, so when you fill your tax forms, you simply cannot create a business loss by increasing your principal.

e.g.:

rental income: 20K
interest on mortgage: 10K
principal on mortgage: 4K
maintenance expenses: 2K
utilities: 1K
insurance: 1K
property taxes: 3K

In this case, even though your expenses are greater than what you earn, you’ll still have a taxable income of 3K (20-10-2-1-1-3).

Hey, I’d like to do it myself, but the rules are really clear and simple. Any accountant in here with more info on this subject?

]]> By: admin http://www.thickenmywallet.com/blog/wp/2007/05/08/investing-in-stock-and-real-estate-saving-taxes-other-considerations/comment-page-1/#comment-25 admin Thu, 10 May 2007 15:33:35 +0000 http://www.thickenmywallet.com/blog/wp/?p=31#comment-25 Generally speaking, taxable income is (income) - (deductible expenses). Your interest payments on the mortgage is deductible but the principal is not (remember also that deductibility is also voluntary, you can not claim the interest, although I don't know why, if you don't want to). If the principal on your mortgage is greater than your rental income, you generally have a business loss (this is a very simple analysis; CRA may take the position that the loss is not allowable for a variety of reasons). If your rental income is the same as your principal, you have no taxable income or a tax loss if you deduct the interest. If the profit is minimal (either because you cannot receive that much rent or your principal is quite high), you have kept your taxes quite "flat" but you are building equity without incurring any operating losses. That is my understanding (remember I am not an accounting); if you have any thoughts on this matter, please share. Thanks. Generally speaking, taxable income is (income) – (deductible expenses). Your interest payments on the mortgage is deductible but the principal is not (remember also that deductibility is also voluntary, you can not claim the interest, although I don’t know why, if you don’t want to).

If the principal on your mortgage is greater than your rental income, you generally have a business loss (this is a very simple analysis; CRA may take the position that the loss is not allowable for a variety of reasons). If your rental income is the same as your principal, you have no taxable income or a tax loss if you deduct the interest. If the profit is minimal (either because you cannot receive that much rent or your principal is quite high), you have kept your taxes quite “flat” but you are building equity without incurring any operating losses.

That is my understanding (remember I am not an accounting); if you have any thoughts on this matter, please share. Thanks.

]]> By: QCLandlord http://www.thickenmywallet.com/blog/wp/2007/05/08/investing-in-stock-and-real-estate-saving-taxes-other-considerations/comment-page-1/#comment-24 QCLandlord Thu, 10 May 2007 03:32:21 +0000 http://www.thickenmywallet.com/blog/wp/?p=31#comment-24 Regarding your comment: "you can keep the taxes “flat” on investment properties (inside or outside of a corporation) by racketing up the mortgage payments so that the cash flow coming in is almost equal to the mortgage payment (in order words, your taxable income is quite low because you are using all of your profit to pay off the mortgage)." Actually, this isn't totally correct. In Canada, even if you increase your mortgage payment, you cannot use payment on the principal to reduce your taxable rental income, since only the interest is deductible. Have I misunderstood your strategy? Regarding your comment:

“you can keep the taxes “flat” on investment properties (inside or outside of a corporation) by racketing up the mortgage payments so that the cash flow coming in is almost equal to the mortgage payment (in order words, your taxable income is quite low because you are using all of your profit to pay off the mortgage).”

Actually, this isn’t totally correct. In Canada, even if you increase your mortgage payment, you cannot use payment on the principal to reduce your taxable rental income, since only the interest is deductible. Have I misunderstood your strategy?

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