# Buy Your Home from Holding Co?



## Islenska (May 4, 2011)

Thought of buying my house from my Holding Co and setting aside portion of cash to pay rent over the years. Save on dividend payout and salary taxation while realizing principle resident rule now instead of the estate settlement. Don't expect house to see much capital gain as we are in the hinterland of Northern Manitoba. Is this a decent idea?


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## Islenska (May 4, 2011)

Oops, meant sell my home to Holding Co----damn typewriter!


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## Fain (Oct 11, 2009)

i'm also interested in the answer


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## OptsyEagle (Nov 29, 2009)

I am sure there is some information you have left out here. Is it safe to assume that the money you want to use for the purchase, is currently inside the holding company, but you do not want to pay the tax involved to get it out.

If not for the above, I cannot see why you would want your holding company to pay tax on the rent it receives from you, and I think it is really early to assume that you will not have any capital gains taxes.


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## Cal (Jun 17, 2009)

Probably best to discuss your individual situation with your accountant.


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## Islenska (May 4, 2011)

Would have enough in Holdco to buy my house. Last year paid ~$23G in taxes for salaries the wife and I received but this year the accountant wants to go strictly dividend pay-out. It has a large dividend tax credit pool built up already so this idea was to cash in some gains via a different route. The Holdco would pay a higher tax on rental income but the rent amount should not be excessive----a hitch somewhere?


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## marina628 (Dec 14, 2010)

I copied and paste your post to my CGA ,her response ....He's nuts - one way ticket. Read what you will into that but I guess it is not a good idea


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## omegacanuck (Jun 16, 2011)

There's a few issues with this.

Firstly, when you operate on a non-arms length basis like this (you and your company are related and therefore not subject to normal profit motives), CRA will be more wary of any transactions between the two entities. The rent your company would charge you would have to be the same as if you were renting to an unrelated third party (ie, enough to cover all expenses, contingencies, plus some profit). If your neighbours house is the same as yours and rents for $1500 a month, no renting to yourself for $800.

The money the company makes on the rental is subject to a higher than normal rate of tax in the company. It's considered 'inactive' income and the rates on this can quickly get near 50% tax.

When you finally sell the property down the road, the company would have to pay capital gains tax on any increase in the property, whereas you would be eligible for the principal residence deduction.

The only way I can see that it would make sense is if you think housing is headed for a crash and you wanted to cash out of your house before it happened. Of course, if that's the case, you should just sell your house to a third party and rent, don't leave your company holding the bag.


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## Islenska (May 4, 2011)

Omeg--good points, probably not worth the effort to persue.

Marina-your accountant's succinct analysis bears introspection!


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## marina628 (Dec 14, 2010)

I pay her by the hour so glad she gets to the point lol.


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