Income Tax Consequences of Purchasing Real Estate Investment Property
With the chance of values we have experienced in the Vancouver Real Estate market, especially in Downtown condominium project; many people who have purchased Pre-Sales are now completing their purchases at significantly higher prices than the property would be worth if they were negotiate a deal today. As long as you don’t live in the property, you are purchasing an investment. Some investments go up and some go down. I think we are all pretty familiar with investments that go down these days. If you turned around and sold a property today, you would probably do so at a loss.
If there is a bright side to this, and its always good to try to find an opportunity or positive angle in times of turmoil; consider this: If you have paid tax on capital gains in recent years, you may be able to carry back this capital loss and apply it against previous years gains. You may be able to get a refund of previous year’s taxes by reporting a loss on your current year’s income tax return. If you do not have previous year’s gains, you can carry forward this capital loss until such time as you have a gain to which you can offset it.
I know we would all rather be worrying about how to pay less tax on our profits; but if its losses we currently have, we need to make the best of the situation.
If you have any questions you can ask the person who does your taxes; or you can always email or phone me, and I would be happy to discuss.
Links:
CRA: http://www.cra-arc.gc.ca/menu-e.html
Net Capital Losses of Other Years: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns248-260/253/menu-eng.html