Author Topic: Stacked Single Family Home  (Read 660 times)

0 Members and 0 Guests are viewing this topic.

Offline msj

  • Jr. Member
  • **
  • Posts: 368
  • I'm outta here...
  • Location: Vancouver Island
Re: Stacked Single Family Home
« Reply #15 on: March 24, 2018, 11:07:12 am »

That said, buildings are a depreciating asset like a car. A new one costs 500K but a 10 year old building is only worth 300K and a 40 year old one is 30K.
In markets with cheaper housing most of the sale will be for old homes.


Had a client who sold a rental property last year come in.

I worked out all the numbers and presented them with their tax bill for which they were shocked.

I reminded them that over the years I explained why they should NOT take CCA (tax depreciation) on the building  since they are only saving tax at 20%/25% rates on that deduction. If the property goes up in value and we need to recapture that CCA then it is possible that they will pay tax at 28 or even 31%. It was right there in my notes going back several years.  I know how to CMA.

[ETA: land is never depreciable, only the buildings/equipment are depreciable at set rates]

Sure enough, they sold one year prior to retirement, meaning they both had their employment income etc so they had to pay tax at the rate of 31%.

In the end it is only an extra $1,000 or so of tax and presumably they had the benefit of the tax savings over the years (which were squandered) so its not like a big deal.

So this idea of non-depreciating buildings is kinda funny. 

Although I will note that one client had a terminal loss on their rental property because the value decreased so much that they could take that deduction. This is where the proceeds of the sale allocated to the building is below the original cost of the building. 

In this case they had a terminal loss on the building, a capital loss on the land, and a capital loss on the bulding (denied by rule bcause you cannot deduct capital losses on depreciable assets).

Alberta, that property is in Alberta so of course it happened. 

« Last Edit: March 24, 2018, 11:10:50 am by msj »
I've gotta have more cow bell! -Bruce Dickinson