I won one

[worldjohn]

The 7 acre former marble quarry in madoc. Brilliant or lucky bidding as my bid was $500 dollars more than the next guy and less than half the assessed value.  I havent seen the land yet (snow issues) and was wondering if anybody did see it or knows anything about it.  The title is clean...but is it really important to do an execution search on the name of the former owner?

[Frank]

If I were you I'd make sure that I did that execution search before coming up with the balance of the money for the Municipality.  You can still walk away with only youir deposit at stake.  Crown liens that might be registered against the owner will stick to this property like glue, and glue themselves to you.

good luck with it.

[cokotlc]

I believe you should be very careful when doing your search on the owner.  Local rumour has it the quarry was closed once or twice for pollution issues.  Not sure how true the rumours are, but my understanding is that there may be environmental hazards on the property.  I was talking to one of the former employees of the marble quarry.

Also as a side note, much of the water table in that area has been 'somewhat polluted' from the Deloro mine only a few kms away.  Careful if you are planning on drilling a well, you should definitely have the water tested regularly.

[Pfm1011]

This is exactly why I say use a corporation. Before you close on the land go register a numbered company . About $400, Have the tax deed registered in the corp name.  You lend the corp the money to buy the land.  If the quarry is polluted, You can fold the company and walk away.  If it is clean you take the land back from the corp and keep it.    If you have sent the payment , ask the town to hold off on the registration and then change the deed to the Corp prior to registration.

If they register the deed under your name, and then you switch to a corp later when you find out there may be issues, They May still try to stick you with the cleanup bill as environmental responsibility does not end at time of property sale.

If you haven't sent final payment, I would do some research now , Might be better to walk from the deposit  if you cant get the answers prior to the 15 day or decide to proceed, go the corp route.

If it is already registered, Don't lose sleep yet. If the deal gets real ugly, IE there is nasty cleanup costs . You may still be able to get out of the responsibility later by claiming the town had a fiduciary responsibility to inform you of the environmental issues as they clearly knew of the existence of problems since the quarry had been closed.  Not a fight you want to have, but a good position if required.   

I did note when Orillia sold off a few months ago, They stated MOE ORDER in the tender offering. However Kingston did not but the Kingston properties were huge dollars and I'm sure the city knew no-one would bid. I'm betting if anyone would have bid they would have disclosed the issue.

In regards to the rumours, you have to remember that the MOE can close you for as simple of a problem as there is too much silt coming from your day to day  operation or the above ground diesel tank doesn't have a retention pad in case it leaked. Doesn't have to leak , Just not have the proper protection in case it did.

You should be able to get info from the City or MOE right now in regards to any previous orders if they exist.  Also note that the "local rumours" may be as simple as the number 2 bidder hoping you walk from the deal or silly small town gossip.

[worldjohn]

thanks Frank, did the execution search ($11) and its clean. Now I have to hope that the land itself is clean.
Thanks Pfm1011 for the reassurance.  I doubt a former marble quarry can be that polluted but I will definatly look into more before I pay the whole amount? Call the MOE I guess? But I heard it was closed down for operating without a license.
I like your idea of registering it into a corporation.  But will there costs involved If I transfer it back into my name? And why transfer it back into my name?  What are the ramifications of leaving it the corporate name?
The deloro mine is about 8kms away from my property. And there is arsenic that leeched into the moira river system.  The the minefield is south therefore down river from my land. This gives me a little comfort considering the town of Madoc is 4km south of the mine.
But if its not appropriate for a little cottage then does anyone want to buy some marble in bulk?

[Pfm1011]

Operating without a licence.... If thats the case you have no pollution problems but you will have to give up on your dream of carving a 100 ft high statue of Bart Simpson

In regards to the corp.   Note: I am not an accountant or lawyer so this FREE advice is worth every penny you are paying me

The first thing to understand is the legal concept of a corporation. It is a free standing individual. No different then any person. If you lend money to a corp, it is no different then lending it to a stranger.  Worldjohn the person and Worldjohn the corporation are two completely different people.  Worldjohn the person isnt taxed on the profits of Worldjohn the corp until you sell the shares of the corp or take money out as a dividend ( which is taxed extremely favourably at a personal level)

The simple way to transfer the land from the corp to you is..repossess it.   You lend the corp the money to buy the land. It never pays you since it has no revenue and should you want the land you simply grab it back.  You actually write a loan agreement between you and the corp.  You can download a mortgage or General security agreement from the net for 10 bucks.

Reality is that unless you plan on retiring on this property and making it your principle residence, you will never want it back in your name. Even if it is a cottage which you plan on eventually selling, you can use a corp as you cant write off  mortgage interest on  a second residence in Canada like you can in the states.

There are several advantages to using a Corp. Liability protection for one. Should this be dirty , you cant be nailed personally and can just walk away. Should two kids on motorbikes break their necks ( after running over your NO Trespassing sign) they cant come after you personally.

Tax.   Buying and selling land is a business venture .    If you are planning to play this game. You will buy several pieces over the years, Some will make you money, some will be dogs.  In addition you will incur allot of expenses. Property tax ,  Title searches, gas and hotel expenses , Maybe you have to rent a tractor to cut down fields etc . If you do this personally , you will be taxed at your  personal income tax level  on the money makers but the money losers and expenses will be your problem and cant be deducted.  By incorporating you can write off the LEGITIMATE  expenses and losses against your profits.   Each bid you make on a taxsale property costs several hundred by the time you are done title search, inspecting the land etc .  Lets say you lose ten bids for every one you win. You have probably $2000 in real expenses that you have incurred and can be deducted from the profits you make on the one winner.  Just add up what this property cost you to win and what it will cost you annually to maintain and do the math.  That $2000 would be $600 or so off the  taxes which you will pay if you sell.  If you keep this land 10 years you probably have 5 k in property tax alone on the piece.

If you drive to Sudbury to inspect land , stay in a hotel, and have to eat out on the trip. These are legitmate expenses and can be deducted from your profits you will be taxed on when you sell the land. You cant write off a Porsche, but you can deduct legitimate mileage.You can even pay yourself for your time spent (You will have to pay personal tax on the income).

It may seem like a hassle for one piece but own and flip  a couple pieces and suddenly the numbers start to add up.  This same corp can also be used for other business IE rental houses  , Marble Bart Simpson statue exporting etc

The cost to operate a small corp is minimal. Just have to file an annual income tax statement for the corporation.   There is a Capital tax on corps but it is getting smaller and should be gone in less then 3 years.   Dont use lawyers and accountants as the costs will get insane. Use the lawyer to incorp and thats it. Tax returns for the corp are as simple as personal and dont require accountants or auditing unless you go public or want to borrow large. Even then banks accept unaudited statements so you can essentially have no costs to operate the corp. Just a few hours  a year extra doing the books.



FREE ADVICE WORTH EVERY PENNY

Veterans of this game..comments please

[speedfreeksteve]

For the sake of preventing people going to jail based on blantantly incorrect and dangerous advice, there are some details that I think I should clarify (I own a corporation):

The first thing to understand is the legal concept of a corporation. It is a free standing individual. No different then any person. If you lend money to a corp, it is no different then lending it to a stranger.  Worldjohn the person and Worldjohn the corporation are two completely different people.  Worldjohn the person isnt taxed on the profits of Worldjohn the corp until you sell the shares of the corp or take money out as a dividend ( which is taxed extremely favourably at a personal level)

Lending to your corp (or any corp) is not as simple as lending to Joe Blow that lives down the street. The actual lending is no problem, but documenting it and sending out forms to the government, etc leads to much more in time and accounting costs than lending to just a person. There as reasons that the government wants to know about individuals lending to a corporation. Many scams have been attempted where an individual pumps their money into their own corporation, the corp declares bankruptcy or defaults on the loan, and the individual declare the loss a tax writeoff.

The simple way to transfer the land from the corp to you is..repossess it.   You lend the corp the money to buy the land. It never pays you since it has no revenue and should you want the land you simply grab it back.  You actually write a loan agreement between you and the corp.  You can download a mortgage or General security agreement from the net for 10 bucks.

The legal paperwork involved in that would probably be worth more than the land is worth. For just about any transaction beyond paying money out, taking income in, or buying assets you need a lawyer when it involves a corporation.

It also would look alot like an illegal tax shelter to revenue canada. There's nothing you can simply "grab" from a corporation whether you own it yourself or not.

You cannot use a general loan agreement for a mortgage between a corporation that is a non-registered lender and yourself. Again, there are legal reasons for this especially due to money laundering.

The cost to operate a small corp is minimal. Just have to file an annual income tax statement for the corporation.   There is a Capital tax on corps but it is getting smaller and should be gone in less then 3 years.   Dont use lawyers and accountants as the costs will get insane. Use the lawyer to incorp and thats it. Tax returns for the corp are as simple as personal and dont require accountants or auditing unless you go public or want to borrow large. Even then banks accept unaudited statements so you can essentially have no costs to operate the corp. Just a few hours  a year extra doing the books.

If you call $1000-$2000 or much more to do your yearly tax return for the corp minimal, then I suppose its minimal. But with the strategies mentioned before the cost would be in the thousands, not to mention the corporate tax, and then its still not your money its the corporations. If they pay you out a dividend then you still have to pay personal tax on that.

Tax returns for a corp are as simple as personal? No that's just an insane statement. You have to hire an accountant to do corp tax returns!

It's damn near impossible to run a corporation on the cheap. You can't run one without a bank account either, another $10-$15/month to consider not including ordering your cheques. If you're corporation isn't making more than I'd say 40-50k a year then it's probably not worth it to an individual and you're better off claiming it as self-employment income and splitting the income with a spouse or relative. Sure the corp can offer SOME protection but you're not any more liable in a tax sale property after you've taken possession than you are on your personal property in most cases.

[Jayz]

Luckily or not, I wasn't Canadian in my first 30 years. So I still don't "follow" tight-ass Canadian rules, even after I became a Canadian citizen several years ago. I run a corporation where I have co-owners. I also own a registered sole proprietorship under which I am self-employed. I run an unregistered rental business as well where I have several rental properties to manage across Ontario ... Sounds complicated, doesn't it? Not to suprise you, for all those, I only use one accountant at the year end only to file my corporate tax for $800!

I don't try to mislead, this is what I understand and what I do:

you don't need to incorporate to write off business costs/expenses. you can write off expenses for any type of business, registered or not, as long as in which you are to make profit (that can be measured monetarily).

I register a corporation, a seperate entity, for a number of reasons but not writeoff - image, which is important especially when you do international business; limited libility, so banks/creditors can't legally go after me personally for money I borrow or owe if the company goes under, or for any troublesome lawsuit that I don't wanna persoanlly get involved - this doesn't mean I don't run a responsible business it's rather a way of personal protection; tax benefit, for business with potential significant profit - money earned is taxed rather at lower corporate rate than otherwise at higher personal rate if it's not run under a corporation. 

believe or not, I (or other owners) simply take money out of company's bank account for personal use or deposit money into company's bank account without any borrowing or lending agreement that you guys mentioned. for us it's just a matter of record and paper trail (such as bank transction receipt). At the fiscal yearend, the difference between "withdraw" and "deposit" will be considered either owner's investment or "dividend" after corporate tax. The latter is normally the case.

yes you can file your corporate tax on your own as I did the first year of my incorporation since there wasn't many transactions so I could handle my own. you don't necessarily need to pay an accountant to do your corporate tax, however if an accountant can help you "discover" something to your benefit that's worth the money you pay to him or her, why not? 

Back to this case, if I were worldjohn, I would purchase this property under a corporation if I still could to avoid any unexpected that might arise from uncertainty. At some point of time down the road, I would sell this property from the corporation to myself at a "reasonable" price I want and make it my principal residence to avoid capital gain tax if possible if I "foresee" I could sell again to somebody else for a significant profit.

My experence to share. Discussion welcome but no hypocritical attack please.

[kcu]

Every comment can be right and wrong. It all depend on the individual situation. If a legal problem is small, you can probably get away with a corporation. But if the problem is significant, any lawyer would name you, your corporation and any other involved party as defendants, so there would not be much protection available. The same goes for tax issues. if CRA wants to audit you, they would allow only legitimate expenses and if you are not running an active business, your travel expenses and meals would not be accepted.

As for environmental issues. I personally spoke with MOE and their position is very simple. If you or your corporation owns or owned a land at any time, they have every right to name you and your corporation in their claim. Maybe you would be able to convince the judge that you had no knowledge, but you would still have to defend yourself in court.

And if there is an accident of any kind, you can bet anything that every possible name would be included in the lawsuit.

You have to protect yourself the best way you can, but do not think that your protection is solid. I do business only through corporations, but I have no illusions about the risk I take by being a director.

[Pfm1011]

You will note LEGITIMATE is in caps .  How is lending money to a corp and taking the security back in any way money laundering or a tax shelter.? It is only laundering if you fake the loans.    It is only tax evasion if you make fake loans then declare a loss for non payment.  If you lend real money to the corp, you can get real money back.  You have to lend it because any other injections would be owners equity which is unrecoverable in the case of a corporate failure and is unsecured.

Nothing I described is illegal or tax evasion in any way shape or form. 

Documenting  the loan is as simple as downloading and completing mortgage or General security agreements from http://www.megadox.com.  You don't actually believe lawyers write each mortgage?  They use the standard forms and then bill you like they wrote it.   Get a General security agreement from a Lawyer, He will use the IDENTICAL FORM  and not change a word. He will charge $500 to $1000 for the "service".

If you want you can register it on the title of the land or PPSA the corp.

In regards to the Income tax filing. The T2 is a simple 8 page form with 99% not applicable to the average small corp. There is no requirement for audited financial  statements.  If you are making nil or a loss you can even use the short form.

In regards to MOE or any party, They can name you or any party they feel like in a suit. You can name the King of Siam if you want. The legal onus is on them to prove your personal liability. If they dont ,they get the bill.  (sort of, since the cap on legal is only half of what any lawyer charges hourly usually )( I believe 375 per hour is the absolute max the court will award)
 
The MOE can name you as a director  only if they can prove you had knowledge, or should have had knowledge of the polluting. Since you didn't dump the barrels, you aren't liable , and CANT be held liable for the pollution.

However your corp can be , and WILL BE held liable for the cleanup as it owns the land and the only way to get out of it is A: Sell the land ( since no-one will buy it thats a non starter)or B: Walk away

If you own it personally, Its impossible to walk away , sorry about your luck, Get cleaning. ( and a mop and bucket wont do it)

Anyone buying tax sale property without a corp is a blindman walking in a minefield.  You wouldn't buy normal commercial  land without a soil sample , why would you buy taxsale without one?? Since we don't do soil samples and history checks..You have to cover your butt.

Jayz  . . In regards to Canadian tax laws, They actually aren't that bad, not the best, but not the worse. The big problem we have here is that the average person cannot access the laws easily or the caselaw.  The income tax act is not even online, let alone caselaw.   You have to buy it from CCH and then wade thru 2800 pages .  I do business in the UK and the entire income tax act is online, as are interpretation letters and tribunal decisions.   The case decisions they publish are complete, not just the ones they won , but all the ones they have lost too. Every document cross references interpretation in laymans terms, not legaleeze. And all of this is online. The UK principle of Self assessment is they give you every tool necessary to beat the taxman....If you cant find a way to beat him..you owe it so pay up and quit bitching.  In addition in the UK , After one year they cant come after you as long as you made full disclosure.
You write off a Porsche as a delivery car, They have one year to question it. Unlike here where they can go back to the beginning of time. 7 years generally, but find one little error and back to birth we go. Makes good business for lawyers and accountants.

(By the way steve I own 8, all seperate, all legit, and I have been audited without a problem, Mind you I dont claim a porsche as a delivery car and absolutley no scamming. Never mess with the government)

[Pfm1011]

"Documenting  the loan is as simple as downloading and completing mortgage or General security agreements from http://www.megadox.com"
You could also use the "Equitable Mortgage" form for Ontario .

[Frank]

thanks Frank, did the execution search ($11) and its clean. Now I have to hope that the land itself is clean.
Thanks Pfm1011 for the reassurance.  I doubt a former marble quarry can be that polluted but I will definatly look into more before I pay the whole amount? Call the MOE I guess? But I heard it was closed down for operating without a license.
I like your idea of registering it into a corporation.  But will there costs involved If I transfer it back into my name? And why transfer it back into my name?  What are the ramifications of leaving it the corporate name?
The deloro mine is about 8kms away from my property. And there is arsenic that leeched into the moira river system.  The the minefield is south therefore down river from my land. This gives me a little comfort considering the town of Madoc is 4km south of the mine.
But if its not appropriate for a little cottage then does anyone want to buy some marble in bulk?

Things are starting to look up, no crown liens, and no pollutants.  Excellent.  As to all the advice being tendered vis-a-vis incorporation...that is your decision to make, and it is all good advice.  If this is the only property you ever intend to buy and you want to turn it into your princple residence, then you should keep it in your name.  If you plan to re-activate a properly licenced marble pit, or build a rental/commercial establishment on it, then see a lawyer and get into a co.   If all you plan to do is buy up as many properties as you can and turn them for a neat profit....see an accountant, they will tell you that your chances of success at claiming capital gains are slim, and that you would pay a lower tax rate on a small business coporation...with eventual dividends to you the owner, as well as being able to write off a lot of you 'exploration' costs ... I call the costs of investigating properties for acquisition - 'exploration'costs.    You be the judge.

[speedfreeksteve]

I'm all for anyone using a corporation if they intend to buy multiple properties. It seems to me that most part-timers in this game tend to stick with one or two at a time so I'm not sure it's worth the trouble in that case. But who knows, maybe we have a Donald Trump of tax sale properties among us (well there is Dignam I guess)

People have successfully written off sizable "exploration costs" in real estate speculation in Canada in the past, so there's no reason it shouldn't be a viable expense for tax sale properties.

I do say though to cover-your-a** at every turn, incorporated or otherwise. Keep rough trip logs, save receipts for gas that show where you were and when, and keep a copy of all notices where you weren't the winning bidder on a property.

[worldjohn]

Wow thanks for all the advice, it is appreciated. I have decided to, then changed my mind 3 times about getting a corporation.  A couple more clarifications will help finalize the decision.

Can I buy a corp for less than 400... a used one perhaps?

To switch the land back into my name, is it as simple as reposessing it with no fees involved? I don't want big expenses as this land is just a place to get away from the city once in a while.

If it is polluted why can a corp walk away from it but a person can't? If I walk away it ends up in tax sale again in 4 years.  I've made every reasonable effort to find out if it is polluted? No court would find me liable for another persons pollution.

I've recently a small business as a sole proprietorship (much cheaper than a corp). Is it possible to put the land in the business name? Then if I flip it, can I claim it as business profit?

[Pfm1011]

You can do a numbered corp for 4 to 500 online, Add about a hundred or two for a named corp. IE 123456 Ont inc versus Worldjohn Inc

Numbered always seem fishy so I always use a name

Do not buy a "used one" as the off the shell corps cost more if they are clean and are really only used if you want to do an IPO or need a tax shelter , IPO etc,. They cost thousands but some people need old corps for certain reasons. You do not.

A used one that is cheap has liability problems etc. May have pending litigation, outstanding taxes etc You want new virgin and can be done online for the cheap, Dont buy any of the scams with monitoring or compliance security, annual meeting fees or any other silly add on

Sole propietorship will give you absolutely no liability protection or tax incentives.If you are going to use the sole, just use your personal name,


Frank.."Exploration costs"...thats a good one.