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Author Topic: Sell property to my own corporation - tax implication  (Read 9937 times)
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ajasco
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« on: March 04, 2008, 07:45:57 PM »

Hello all,
I need help.
I own a corporation. I am about to move from my condo to another bigger house. Since I will like to expand my business, I  will like to sell this condo to my corporation so that my corporation can rent it out.
First. Is this legal?
Second, Is there any tax implication to me personally?

Thanks all in advance

Ajasco
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speedfreeksteve
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« Reply #1 on: March 04, 2008, 08:42:22 PM »

You're pretty much looking at land transfer tax and legal fees for the transfer. You will only be able to do it for close to fair market value unless you want the government all over you like a cheap suit.

Good plan though for renting it out.

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Jayz
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« Reply #2 on: March 04, 2008, 10:14:52 PM »

I am wondering how hard or how easy for a corp to get mortgage if it requires one.
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ajasco
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« Reply #3 on: March 05, 2008, 09:31:23 AM »

Thanks all,
As for fair market value, legal fees, land transfer, I have no problem. I am determined to follow due process as I would do if I sell it to third part. I just want to be sure that this is legal and that there is no tax implication to me the seller. For example, capital gain etc.

Regarding the mortgage for corporate. I have called few companies, they all seem to be evading lending to business. I have just obtained a phone number of a part of ING direct that lends to commercial entity. I will contact them very shortly.

Any more information will be greatly appreciated.

Ajasco
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Pfm1011
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« Reply #4 on: March 05, 2008, 11:50:16 AM »

The tax implication to you is you want to  to sell it a close to market value to the corp. (High side but not by too much) . Since this is your personal residence you have no capital gains.  You want the corp to pay the high side (not silly) so that they take less capital gains later   You can do a VTB to your corp. If you do, make sure you register it, Any outside lender will want you to subjagate but that is no problem.

Do a neighbourhood sale search to base your sale price on so you can justify your market value. Plus when you go to the bank you can give them an accurate valuation on the property. You dont want to go in claiming its worth 300 and have the bank get an appraisal at 250. 

 In regards to a mortgage to a corp . Most places will put you on the hook since the mortgage will be based on your personal  cash flow. The corp will be looking at 90%  occupied but at todays rental rates that wont support a mortgage. So back to you it goes.

It is ok to guarantee a mortgage but watch the wording. Make sure it is a co applicant  and cant be consrewed as a full personal guarantee to the corp. That can kick you in the ass should you every have liability issue.

Confirm that you really want to switch it to the corp. I know people that left them in their own name as you will have landlord insurance anyways. May not be worth the hassle of corp in this case as you can write off alot personally as a landlord. 

Your best bet is to talk to your bank manager about the mortgage and see if it makes a difference to them , then decide.

Everything will be based on your personal salary plus the rent at 90% occupancy when calculating whether you qualify. 

You also amy want to look at the whole big picture as although renting a condo looks great on paper, I have found that the math doesnt add up. After you condos fees, which always increase, taxes etc . You arent left much if anything from the rent. may be better to dump it and use  the cash on the new purchase .

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speedfreeksteve
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« Reply #5 on: March 05, 2008, 04:45:13 PM »

The mortgage question is fairly obvious.. if your corporation makes money then you can get a mortgage no problem. If your corporation doesn't.. then obviously they won't.

My bank was happy to give my corp a good sized line of credit once I had a few months of steady (and decent) revenue flowing into it.
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