Canadian Money Forum banner

1 - 9 of 9 Posts

·
Registered
Joined
·
9 Posts
Discussion Starter #1
If I own a rental property with my wife and we put 80% shares of ownership to my wife in the title (tenant in common), can we get income tax and/or capital gain tax benefit providing she has low or no yearly income. If i show 20% of the rental income under me, can I put all cost related to the rental property under me as well (partner level expense instead of business expense)?
 

·
Registered
Joined
·
10,164 Posts
My take is if she has 80% ownership on title, then she collects 80% of the revenue and writes off 80% of the costs. You simply cannot cherry pick.

That said, if she has little to no income, how did she contribute 80% of the capital (equity) in the first place? You simply cannot 'gift' her the capital for that 80% without attribution of income and capital gains coming back to you.
 

·
Registered
Joined
·
9 Posts
Discussion Starter #3
I apologize. I should have written more details. She recently doesn't have earnings but she has her savings from working last 20 years or so. She paid the down payment from her savings which is not 80% but much higher than 50% and compared to what I paid. I just randomly picked the number 80 to start the conversation on this topic.
 

·
Registered
Joined
·
9 Posts
Discussion Starter #4
My take is if she has 80% ownership on title, then she collects 80% of the revenue and writes off 80% of the costs. You simply cannot cherry pick.

That said, if she has little to no income, how did she contribute 80% of the capital (equity) in the first place? You simply cannot 'gift' her the capital for that 80% without attribution of income and capital gains coming back to you.
I apologize. I should have written more details. She recently doesn't have earnings but she has her savings from working last 20 years or so. She paid the down payment from her savings which is not 80% but much higher than 50% and compared to what I paid. I just randomly picked the number 80 to start the conversation on this topic.
 

·
Registered
Joined
·
10,164 Posts
Okay, then the discussion still holds. Her interest is proportional to her capital investment (and presumably proportion of title), and revenues and costs will be in proportion to that investment. It's a business... unlike one's own principle residence.
 

·
Registered
Joined
·
1,718 Posts
Her interest is proportional to her capital investment (and presumably proportion of title)
But the title can be made out in arbitrary proportion, not at all reflecting capital investment -- I think that is the point here. Having it not match exactly is probably a normal situation, and not necessarily a wheeze to cheat the CRA. If there was a joint mortgage at the time the title was registered, the ultimate capital contribution by the parties wasn't even known at the time. So you'd have to keep track of all the payments, who made them, and what portion of capital vs. interest was in each. All this is a potentially difficult thing to document fully, and my GUESS is that the CRA would accept whatever you claim to be the proportions, assuming they are plausibly correct.
 

·
Registered
Joined
·
10,164 Posts
I really don't know about that since this is an investment property with income generation that CRA takes specific interest in, versus a principle residence that has no tax implications. CRA has a vested interest in attribution of income, and income is a factor of capital (CCA), revenue (rent) and a host of expenses, including mortgage* interest. Why would any 2 or more people really have a tenants-in-common title if it was not to apportion ownership along capital contribution lines?

* I also question how a joint mortgage would be assigned with a tenants-in-common title, since a lender is not likely to loan owner A more than owner A's title interest in the property. I suppose provinces that require (or can have) beneficial interests assigned that differ from tenants-in-common title interest might allow for such anomalies. That is beyond my pay grade. [This is different from a joint title where beneficial interest can be registered, e.g. a parent helping out an adult child qualify for a mortgage, but not wanting to have more than say a 1% beneficial interest because it is actually the child's principle residence in which the child is responsible for all costs and value gains.]
 

·
Registered
Joined
·
1,718 Posts
Why would any 2 or more people really have a tenants-in-common title if it was not to apportion ownership along capital contribution lines?
Well, it could be a wheeze to try to improperly implement income sprinkling/splitting, of course.
But it could be along the lines of a pre-nuptial agreement, so as to set out the split that should take place in the case of a split.
Maybe a way of sheltering one party from another party's creditors.

If Aunt Matilda gives her cottage to her two nephews, it could wind up in common between the two, despite neither making any capital contribution at all -- and who's to say that Aunt Matilda didn't think Jessie was more responsible and put it only 30% in little Johnnie's name. When Jessie and Johnnie rent out the cottage, is it okay for them to split 70/30? or does the CRA want them to split the income 50/50?
 

·
Registered
Joined
·
10,164 Posts
Well, if Auntie gave Jessie 70% of the title, she gifted (or bequeathed) 70% of the value to Jessie. That is precisely how beneficial interest would be assigned in a testamentary trust (as an example).

FWIW, my spouse and I, in a late-in-life relationship have our home 50/50 tenants-in-common, each having contributed 50% of the capital, such that our individual interests will go to our biological beneficiaries upon our death.
 
1 - 9 of 9 Posts
Top