# Can my corporation buy my lot?



## dv7834 (Dec 30, 2012)

Strange question, I know. Here are the details. In June our house got destroyed by the flooding in Alberta. We have been offered a rebuild package by the government; however, we do not have to rebuild to get the money. Instead, my wife and I have decided to demolish the house, get the rebuild money, then sell the empty lot in several years time.

But since this was our principal residence, I would also like to crystallize the tax-free capital gains sooner rather than later. 

Is it possible for my corporation (which has dealt in real estate before, btw) to buy my empty lot at fair market value? This would serve to give us our tax free capital gains on the house and to withdraw funds from the corporation tax-free.

In several years time, the corp would sell the lot.

I'm meeting with my accountant in 2 weeks, but in the meantime I wanted to see if anyone has any thoughts on this one.

I placed this under real estate, but it could just as easily go elsewhere, so please move as deemed appropriate.


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## MoreMiles (Apr 20, 2011)

dv7834 said:


> Strange question, I know. Here are the details. In June our house got destroyed by the flooding in Alberta. We have been offered a rebuild package by the government; however, we do not have to rebuild to get the money. Instead, my wife and I have decided to demolish the house, get the rebuild money, then sell the empty lot in several years time.
> 
> But since this was our principal residence, I would also like to crystallize the tax-free capital gains sooner rather than later.
> 
> ...


Many small business have extra money left in a corporation. CRA does not want those business owners to spend business money for personal usage. If you do, that part of money is considered taken out of your corporation as salary, and you will be subject to personal income tax on that amount. You have to structure it in a way the land purchase is to generate income. In other words, you have to pay a rent to your corporation, and that rent has to come from somewhere, either a stranger or yourself. Otherwise, everyone would be buying their home with 'before tax' corporate money, right?


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## balexis (Apr 4, 2009)

Do you actually need to sell the lot in order to crystalize the tax-free gain? For example, if you convert your principal residence to a rental unit, you can get an appraisal to mark the transition. future taxable capital gains will be calculated against that appraisal. Maybe such a thing could be done with your lot.


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## Just a Guy (Mar 27, 2012)

Would the lot be worth more than the lot+house? If not, then there wouldn't be a capital gain.

I assume you'd move to a new place, so the lot may have a gain/loss over the years which wouldn't benefit from capital gains inside the corporation, plus you'd need to charge GST on the sale.


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## dv7834 (Dec 30, 2012)

Thanks for the responses. I think you're right. CRA would frown on it for the reasons you mention.


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