Deferring capital gains when selling property

[Dan Golby]

Is it possible to sell a property in Canada and take the money and roll it into another property without paying capital gains? Just defer them to another day sort of thing

I've always been under the impression that you could only do this in the USA but I talked to someone who owns a couple of properties today that claims it is possible in Canada too.

I'm hoping to port a mortgage anyway so the capital gains would be an added bonus



Thanks in advance!

 

[Thomas Beyer]

Enlighten us how this is possible in Canada.



Here is what I know, but there might be other options:



A) One thing you could do is lease the property to someone. So you do not sell it. Say you buy it for $600,000 and now it is $1M, i.e. a $400,000 capital gain. You lease it for $5000/month for 20 years with a certain buyout clause for X $s (say $1).



B) You could do an Agreement for Sale (AfS). Again, the legal ownership doesn't change. The buyer pays you $600,000 and $500,000 in 5 years (or $600,000 in ten). You essentially delay the capital gain until it is sold.



C) You buy a firm with a loss, say a $400,000 loss. Maybe you pay $40,000 for this. Then the loss and the gain wash out, so no taxes payable.



Since the capital gains taxes in Alberta are only 19.5% it is often not worth all these tricks though.

 

[Dan Golby]

I didn't think it was possible, but the guy who told me it was possible seemed pretty confident......I had to ask.



I will just "defer" the capital gains by buying RRSPs with the profit



Thanks for clearing that up.

 

[tkjca]

There is a way to spread the gain over a 4 or 5 year period but only if you are being paid for it in installment; say you took a vendor take back mortgage.



There is also some replacement property rules but that is if certain things happened to your property, like it was expropriated.



these are case specific, so check with your Accountant. I would recommend a good CA that specializes in tax. Been a while since I've done one of these myself, but I've done then.



TJ

 

[Dan Golby]

I'm just going to pay it and be done with it. No tricks, nothing up my sleeve. But thanks for the help!

 

[itchycow]

Probably the wisest and surest choice, Dan!