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westcoastfella
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Re: Vancouver's housing market crash hits home.

Thu Sep 08, 2016 10:07 am

BTW, there is a common consensus out there that if you rent out less than 50% of your home and if the building envelope is not altered to accommodate a revenue suite the CRA won't bother you. See opinions below:

...
...
...
The general practice I've seen in Vancouver -- where suites are very common -- is that if the non-residence portion is less then 50% (includes suites and home offices), and the house still looks like a house (if internal stairs have been removed they could be replaced...there isn't a store attached, it isn't really a duplex, etc --basically almost all cases) people rely on the above and claim principal residence on the whole thing. Technically, it may be offside -- but it's in line with their stated practice. What constitutes a 'structural change' might be arguable...but I've never seen it challenge where the envelope still looks like a single house.
Geyser, I see a lot of opinions, arguable statements and "general practice" statements - which is really all we have to go on right now.  Clearly there are many homeowners with basement suites that have opinions counter to yours.  And tax law is ambiguous on its definition of suites and PR status with regard to purpose and makeup.  Hence the reason that CRA has not simply waded in and claimed its fair share.

The only opinion that matters will be the eventual court opinion, if/when CRA charges someone for tax owing on their PR and the owner inevitably fights it.  If a precedent is set by a court that clearly defines a secondary suite and clearly states that it constitutes a taxable portion of your otherwise tax-free home, then look out below.  I don't know if this is an "if" or a "when" event.
 
Geyser
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Re: Vancouver's housing market crash hits home.

Thu Sep 08, 2016 12:08 pm

BTW, there is a common consensus out there that if you rent out less than 50% of your home and if the building envelope is not altered to accommodate a revenue suite the CRA won't bother you. See opinions below:

...
...
...
The general practice I've seen in Vancouver -- where suites are very common -- is that if the non-residence portion is less then 50% (includes suites and home offices), and the house still looks like a house (if internal stairs have been removed they could be replaced...there isn't a store attached, it isn't really a duplex, etc --basically almost all cases) people rely on the above and claim principal residence on the whole thing. Technically, it may be offside -- but it's in line with their stated practice. What constitutes a 'structural change' might be arguable...but I've never seen it challenge where the envelope still looks like a single house.
Geyser, I see a lot of opinions, arguable statements and "general practice" statements - which is really all we have to go on right now.  Clearly there are many homeowners with basement suites that have opinions counter to yours.  And tax law is ambiguous on its definition of suites and PR status with regard to purpose and makeup.  Hence the reason that CRA has not simply waded in and claimed its fair share.

The only opinion that matters will be the eventual court opinion, if/when CRA charges someone for tax owing on their PR and the owner inevitably fights it.  If a precedent is set by a court that clearly defines a secondary suite and clearly states that it constitutes a taxable portion of your otherwise tax-free home, then look out below.  I don't know if this is an "if" or a "when" event.
You are right, there are a lot of opinions out there. I agree with this opinion which you posted 3 years ago:

Westcoastfella:
"I can think of no advantages to not claiming income - you are more likely than not to eventually get caught, and penalties are steep.

Advantages to claming it are peace of mind and ability to deduct expenses against your income. In most cases, you should be able to claim expenses that put your rental income as close to zero as you want to get. Property taxes, strata fees, costs to visit your investment (gas/car/meals), mortgage interest if you have one - its all a deduction."


Of course by declaring the income and claiming all legitimate expenses for a basement suite you avoid the risk of criminal charges but you also better remember to declare that only part of the house is subject to the PR Capital Gain exemption. Surely that's better than waiting for the CRA computers to discover it, thus exposing you to possible charges of gross negligence with your tax filing?
In fond memory of Taipan, a model of modesty, decency, dignity and tolerance. Long may we all prosper from the tremendous legacy of worldly wisdom and specialized real estate knowledge which he left in the "Arguments" thread.
 
westcoastfella
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Re: Vancouver's housing market crash hits home.

Thu Sep 08, 2016 3:05 pm

Geyser, you are now officialy reaching.  I replied to this in the other post you have going on...

Income/expenses derived from suite != PR status affected by having a suite.  Hiding ongoing income from CRA is clearly against the rules and should not be done by anyone, and the rules around income and expense offset are clearly understood and enforced by CRA.

Currently CRA has no clear ruling on how a suite in your house affects your PR status, even though you would like to believe they do.
 
Geyser
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Re: Vancouver's housing market crash hits home.

Thu Sep 08, 2016 3:24 pm

Geyser, you are now officialy reaching.  I replied to this in the other post you have going on...

Income/expenses derived from suite != PR status affected by having a suite.  Hiding ongoing income from CRA is clearly against the rules and should not be done by anyone, and the rules around income and expense offset are clearly understood and enforced by CRA.

Currently CRA has no clear ruling on how a suite in your house affects your PR status, even though you would like to believe they do.
My suspicion is that few people are dumb enough to commence a court challenge of a clear definition, and when there is an obvious area of grey the CRA probably won't pursue it, perhaps they unofficially draw the line at 50% of total area, but I doubt if they'll tell you that. How many speeding tickets do the police issue for being 1 or 2 KPHover the limit? Go 10 KPH over and they are on your case
There are plenty of clear examples which would almost certainly go unchallenged. Go back and read the regs.
In fond memory of Taipan, a model of modesty, decency, dignity and tolerance. Long may we all prosper from the tremendous legacy of worldly wisdom and specialized real estate knowledge which he left in the "Arguments" thread.
 
Geyser
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Re: Vancouver's housing market crash hits home.

Thu Sep 08, 2016 3:31 pm

Based on the last response, it appears to be time to re-post the following direct quote from a local CGA, ignore it at your own risk:

This CGA's comment was specifically referring to suites "inside the PR":


"Nonetheless, there are circumstances where your home can be partly principal residence and partly investment property.

If your home has a self-contained suite or duplex for earning rental income, the rental portion is an investment property whether or not you claim capital cost allowance on that portion of the building. Therefore, if you make money selling that property, the portion of the gain on the rental suite is taxable."
In fond memory of Taipan, a model of modesty, decency, dignity and tolerance. Long may we all prosper from the tremendous legacy of worldly wisdom and specialized real estate knowledge which he left in the "Arguments" thread.
 
westcoastfella
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Re: Vancouver's housing market crash hits home.

Thu Sep 08, 2016 3:32 pm

Geyser, you are now officialy reaching.  I replied to this in the other post you have going on...

Income/expenses derived from suite != PR status affected by having a suite.  Hiding ongoing income from CRA is clearly against the rules and should not be done by anyone, and the rules around income and expense offset are clearly understood and enforced by CRA.

Currently CRA has no clear ruling on how a suite in your house affects your PR status, even though you would like to believe they do.
My suspicion is that few people are dumb enough to commence a court challenge of a clear definition, and when there is an obvious area of grey the CRA probably won't pursue it, perhaps they unofficially draw the line at 50% of total area, but I doubt if they'll tell you that. How many speeding tickets do the police issue for being 1 or 2 KPHover the limit? Go 10 KPH over and they are on your case
There are plenty of clear examples which would almost certainly go unchallenged. Go back and read the regs.
The court challenge will not be initiated by a home owner.  But if CRA comes knocking at your door asking for 50% of your "tax free" gains on the recent sale of your home, I'd be shocked if it didn't go to court - at which point a clear precedent would be set.  If CRA never pursue's it, then its a moot point and we continue with the (finally acknowledged by you) "grey area" in the tax code around suites and PR status.
 
Geyser
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Re: Vancouver's housing market crash hits home.

Thu Sep 08, 2016 4:06 pm

Geyser, you are now officialy reaching.  I replied to this in the other post you have going on...

Income/expenses derived from suite != PR status affected by having a suite.  Hiding ongoing income from CRA is clearly against the rules and should not be done by anyone, and the rules around income and expense offset are clearly understood and enforced by CRA.

Currently CRA has no clear ruling on how a suite in your house affects your PR status, even though you would like to believe they do.
My suspicion is that few people are dumb enough to commence a court challenge of a clear definition, and when there is an obvious area of grey the CRA probably won't pursue it, perhaps they unofficially draw the line at 50% of total area, but I doubt if they'll tell you that. How many speeding tickets do the police issue for being 1 or 2 KPHover the limit? Go 10 KPH over and they are on your case
There are plenty of clear examples which would almost certainly go unchallenged. Go back and read the regs.

The court challenge will not be initiated by a home owner.  But if CRA comes knocking at your door asking for 50% of your "tax free" gains on the recent sale of your home, I'd be shocked if it didn't go to court - at which point a clear precedent would be set.  If CRA never pursue's it, then its a moot point and we continue with the (finally acknowledged by you) "grey area" in the tax code around suites and PR status.
First of all, CRA will not ask for 50% of your capital gain, they will tell you that the percentage of your home which is "a self-contained domestic establishment for earning rental income" is not eligible for PR status and half of any profit on that portion of the total gain will be added to your income tax and taxed at your marginal rate. Big difference from asking for 50%.
If you agree that "a court challenge will not be initiated by a home owner", are you suggesting that the CRA will initiate a challenge to their own decision?  Why would they doe that?
I agree that they may avoid challenges by unofficially going with a >50% of square footage rule. That possibility has already been discussed.
Areas of grey can be invented even when they don't really exist. Look at the recent debate over the meaning of the word "ancillary".
In fond memory of Taipan, a model of modesty, decency, dignity and tolerance. Long may we all prosper from the tremendous legacy of worldly wisdom and specialized real estate knowledge which he left in the "Arguments" thread.
 
westcoastfella
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Re: Vancouver's housing market crash hits home.

Thu Sep 08, 2016 8:39 pm

My suspicion is that few people are dumb enough to commence a court challenge of a clear definition, and when there is an obvious area of grey the CRA probably won't pursue it, perhaps they unofficially draw the line at 50% of total area, but I doubt if they'll tell you that. How many speeding tickets do the police issue for being 1 or 2 KPHover the limit? Go 10 KPH over and they are on your case
There are plenty of clear examples which would almost certainly go unchallenged. Go back and read the regs.

The court challenge will not be initiated by a home owner.  But if CRA comes knocking at your door asking for 50% of your "tax free" gains on the recent sale of your home, I'd be shocked if it didn't go to court - at which point a clear precedent would be set.  If CRA never pursue's it, then its a moot point and we continue with the (finally acknowledged by you) "grey area" in the tax code around suites and PR status.
First of all, CRA will not ask for 50% of your capital gain, they will tell you that the percentage of your home which is "a self-contained domestic establishment for earning rental income" is not eligible for PR status and half of any profit on that portion of the total gain will be added to your income tax and taxed at your marginal rate. Big difference from asking for 50%.
If you agree that "a court challenge will not be initiated by a home owner", are you suggesting that the CRA will initiate a challenge to their own decision?  Why would they doe that?
I agree that they may avoid challenges by unofficially going with a >50% of square footage rule. That possibility has already been discussed.
Areas of grey can be invented even when they don't really exist. Look at the recent debate over the meaning of the word "ancillary".
Geyser, this is getting really difficult - I'm beginning to feel like I'm talking to tdma

Yes, I understand that they will not ask for 50% of your gain, I was merely using it as a sample.  Taxable amount would vary with house.
I expect that a court challenge would go as such:
  • home owner sells house, pockets gain tax free
  • CRA comes knocking on door, details how they know about previous use of x% of house for rental income, asks them to pay tax on x% of tax-free gain
  • home owner, having never heard of such a thing happening, decides to challenge CRA ruling
  • CRA doesn't back down, home owner takes them to court (people take CRA to court all the time to challenge tax rulings) to recoup losses
  • court decides whether or not tax is owed on some of the gains, based on their interpretation of the tax code
  • ruling sets precedent for future cases like it.  Precedent used as basis for any future claims by CRA against other homeowners.
In the court case, questions around "ancillary" and "self contained suite" and any other ambiguity in the current tax code would be weighed and decided upon for the particular case.

I hope this is not too difficult to follow.
 
Geyser
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Re: Vancouver's housing market crash hits home.

Thu Sep 08, 2016 11:28 pm

Westcoastfella wrote:

"Geyser, this is getting really difficult - I'm beginning to feel like I'm talking to tdma
Yes, I understand that they will not ask for 50% of your gain, I was merely using it as a sample.  Taxable amount would vary with house."


Oh, I'm sorry Westcoastfella, but when you posted this:

WCF
"But if CRA comes knocking at your door asking for 50% of your "tax free" gains on the recent sale of your home,"


I foolishly thought you meant that CRA might come asking for 50% of your "tax free" gains. I apologize for the misunderstanding.



Also when you posted this:

WCF
"The court challenge will not be initiated by a home owner."


I really thought that you meant that the court challenge will not be initiated by a home owner. Thank you for correcting me and clarifying things by posting this explanation of how you think the court challeng will be initiated by a homeowner. 


WCF
"I expect that a court challenge would go as such:

* home owner sells house, pockets gain tax free


* CRA comes knocking on door, details how they know about previous use of x% of house for rental income, asks them to pay tax on x% of tax-free gain



* home owner, having never heard of such a thing happening, decides to challenge CRA ruling


* CRA doesn't back down, home owner takes them to court (people take CRA to court all the time to challenge tax rulings) to recoup losses


* court decides whether or not tax is owed on some of the gains, based on their interpretation of the tax code


* ruling sets precedent for future cases like it.  Precedent used as basis for any future claims by CRA against other homeowners.



In the court case, questions around "ancillary" and "self contained suite" and any other ambiguity in the current tax code would be weighed and decided upon for the particular case."


Actually, "ancillary" can be found in any dictionary, also, the CRA definition of a self-contained suite is pretty concise.

Now tell me the truth, you are tdma aren't you?  :lol:
In fond memory of Taipan, a model of modesty, decency, dignity and tolerance. Long may we all prosper from the tremendous legacy of worldly wisdom and specialized real estate knowledge which he left in the "Arguments" thread.
 
westcoastfella
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Re: Vancouver's housing market crash hits home.

Thu Sep 08, 2016 11:54 pm

sigh :roll:

you're being pedantic, and annoyingly so - so I will stop with this conversation.  I guess we will agree to disagree on this subject.
 
VanLord
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Re: Vancouver's housing market crash hits home.

Fri Sep 09, 2016 7:56 am

sigh :roll:

you're being pedantic, and annoyingly so - so I will stop with this conversation.  I guess we will agree to disagree on this subject.
I think at this point the answer is don't feed the troll.  Geyser appears to be taking on a large green colour with pointy ears and a big nose!!!
 
Geyser
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Re: Vancouver's housing market crash hits home.

Fri Sep 09, 2016 12:19 pm

sigh :roll:

you're being pedantic, and annoyingly so - so I will stop with this conversation.  I guess we will agree to disagree on this subject.
You need to re-read my last post. I didn't need to be pedantic to in order to show you clearly contradicting yourself. Having said that, I agree that you have demonstrated the uselessness of further discussion with you on this subject. Thanks anyway tdma.
In fond memory of Taipan, a model of modesty, decency, dignity and tolerance. Long may we all prosper from the tremendous legacy of worldly wisdom and specialized real estate knowledge which he left in the "Arguments" thread.
 
Geyser
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Re: Vancouver's housing market crash hits home.

Fri Sep 09, 2016 12:21 pm

sigh :roll:

you're being pedantic, and annoyingly so - so I will stop with this conversation.  I guess we will agree to disagree on this subject.
I think at this point the answer is don't feed the troll.  Geyser appears to be taking on a large green colour with pointy ears and a big nose!!!
You might also gain from re-reading my ealier post about Wescoastfella repeatedly contradicting his earlier statements. That sounds more like a troll than me pointing it out.
In fond memory of Taipan, a model of modesty, decency, dignity and tolerance. Long may we all prosper from the tremendous legacy of worldly wisdom and specialized real estate knowledge which he left in the "Arguments" thread.
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