Owning rental houses through holdco VS personal

Leveraging, renting vs owning, making an investment or buying a home?
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Ken
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Owning rental houses through holdco VS personal

Post by Ken » 26 May 2016 15:36

My situation:
- retired within the past couple of years
- significant cash remains in corporation, which has therefore become a holdco
- rental houses in my personal name with equity (net of mortgages) about the same as the funds in my holdco
- most of my investment income is either in my corporation or in my RRSP. Only CPP and net rental income are in my personal name.
It would be nice to get the cash out of the corporation so I am weighing the pros and cons of either
- draining the corporate assets as quickly as possible without paying too much tax... but this will take up to 10 years
- transferring my rentals business to my corporation, starting with selling the houses to the corp
If I was a working stiff, then the rental income would be on top of my employment income so it'd be a no-brainer. Move the houses to the corporation.
But since my personal income is low (only CPP and net income from rentals) I can already control my income by paying myself as much as I like from RRSP and corporation. My accountant agrees... there are lots of tax differences between holding the houses personally or in the corp, but the net is pretty much a wash.
What is your opinion?
Ken
[i]I'd rather be fishing than checking my stocks[/i]

active
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Re: Owning rental houses through holdco VS personal

Post by active » 26 May 2016 21:16

There is no Property Transfer Tax in AB, so the fees would be minimal. But the FMV will likely be higher than your ACB so that might trigger some tax consequences.

Have you considered to have your holding corporation re-mortgage the houses as an investment? That might get you a pile of cash from the corporation if there is mortgage room, no change of ownership required.

Then buy a vacation home in the Desert. Beats Calgary in the winter. :)

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Ken
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Re: Owning rental houses through holdco VS personal

Post by Ken » 26 May 2016 23:07

active wrote:There is no Property Transfer Tax in AB, so the fees would be minimal. But the FMV will likely be higher than your ACB so that might trigger some tax consequences.
Have you considered to have your holding corporation re-mortgage the houses as an investment? That might get you a pile of cash from the corporation if there is mortgage room, no change of ownership required.
Then buy a vacation home in the Desert. Beats Calgary in the winter. :)
I should have mentioned that I've only owned the houses for a couple of years so with Calgary's current economy they are worth pretty much the same as when I bought them. So capital gains tax is not an issue so far.
The mortgage idea is interesting. I can see a bunch of roadblocks, like there are existing mortgages so these would be second's, and my accountant will probably tell me that the CRA will say they are not arm's length so really it's just a shareholder loan, and I would have to make mortgage payments to the corp so at the end of the day the cash would end up back there again. But I'll think about it a bit more. Thanks for the response.
Ken
[i]I'd rather be fishing than checking my stocks[/i]

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Re: Owning rental houses through holdco VS personal

Post by Just a Guy » 27 May 2016 22:42

You could do a section 85 rollover to transfer your properties into the corporation...but I'm not sure that would solve your issue...

But, you may be able to transfer the equity into a shareholder's loan and then take out the money that way.

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