Canadian Money Forum banner
1 - 3 of 14 Posts

· Registered
Joined
·
15 Posts
Discussion Starter · #1 ·
Had a discussion with an acquaintance the other day concerning taxation and having two principal residences. Something didn't quite strike me as right so I thought I'd pose the question to the group here:

He is in the process of moving to a new house (of which him and his common law wife are on title) and is proceeding to rent out his existing condominium. His strategy is that he will not declare his condo as a rental property (and not deduct mortgage interest etc.), but rather, leave things as they are-- collect rent and pay the mortgage as if he were living there. When it comes tax time, he will make no mention of this "extra" rental income.

His strategy is that he will maintain the condo as a "principal residence" along with his new home -- his name appears on title for both properties.

My question is, how would CRA treat this situation? And how would CRA even know which is principal and which is not if it's never declared as such?

This appears dangerous (and illegal) to me, but wanted to see what others thought.
 

· Registered
Joined
·
15 Posts
Discussion Starter · #3 ·
I concur. To me, this is definitely cheating on taxes. It is questionable even if the friend even has to cheat. If the friend owns the condo free and clear but is taking out a mortgage on the new house, he can surely structure matters in a very tax efficient manner.
Right, but in his case, he has mortgages on both properties. I think his ultimate plan is to claim his wife as being the owner and primary occupant of the house, while he is the occupant of the condo. Not sure how this would work since they file taxes as common law partner with the same address.
 

· Registered
Joined
·
15 Posts
Discussion Starter · #12 ·
He can structure his mortgage is such a way that there is very little taxable income from the rental property. Not sure what he is trying to achieve here.
Thanks CC - I think his concern is that being in the highest tax bracket, any rent collected that is not deducted against mortgage interest, taxes, fees etc., would be taxed as regular income in his bracket.

By neglecting to disclose the rental income altogether, he continues pay down his mortgage on the condo, covers all the overhead of the condo, while pocketing the extra cash (tax free), or so it appears in his strategy.

Great points however on Principal Residences being deemed at time of sale and not being allowed for two properties over the same time period. I think if anything, this alone would shoot holes in his theory altogether, and raise flags with the CRA.
 
1 - 3 of 14 Posts
This is an older thread, you may not receive a response, and could be reviving an old thread. Please consider creating a new thread.
Top