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Hi there, this is my first post but I've been following Canadian money forum from some time and it is very informative.

My current situation is I have bought a new house and want to make it my principal residence and turn my old house into rental. I should have positioned myself batter but rental property wasn't planned; due to market in alberta selling isn't making much sense right now. Is it possible to implement smith menoeuvre by re-structuring somehow? I am in higher income bracket and would like to take every possible deduction available.

thanks
 

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It's possible, but what exactly are you talking about? Do you have a mortgage or a Heloc for the rental property?
 

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I do have HELOC against my old house (which I want to turn into rental) new house (which I want to make principal residence) doesn't have HELOC. The way I read about smith manoeuvre, I know it is somewhat complicate situation but I was hoping if I can get an advice or someone can help me to re-structure the whole thing. thanks
 

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Where did the money to buy the property you wish to turn into a rental come from? That is the loan that would be eligible as an investment loan. From what you're saying, it sounds like this loan is paid off.

If this is the case, what you can look into doing is something called cash damming or cash flow damming. You use the gross (before expense) rent to reduce your HELOC on your now primary residence, and pay expenses related to the rental property by borrowing against a new HELOC (doesn't matter what it is secured against). This would include things like insurance, utilities, property taxes, etc.
 
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