# Strata income from a roof top lease and transfer of that income to the owners



## prostoprosireno (Mar 7, 2016)

Hi,

I live in a strata that leases its roof top to a cell phone company. That cell company pays a certain amount to the strata and strata distributes that income to the owners (divides the total income by the number of apartments in a strata and each owner receives a portion of roof top lease income).

Strata Management company has instructed the owners to report that roof top lease income as a rental/lease income on their individual income tax return. Can an owner claim expenses (property tax, insurance, utilities, strata fees, etc.) against that rental/lease income? 

Rental/lease income is insignificant (a few hundred dollars) while apartment expenses are significantly higher (thousands of dollars) so that rental/lease income actually creates a loss for the apartment owner (which then reduces taxable income of that owner reported on his/her regular T4s). 

Does anyone actually know if an apartment owner can claim apartment expenses against such rental/lease income as explained above? Logically the answer is yes but, again, apartment expenses are significantly higher than that income and it is hard to believe that CRA would allow a loss on rental/lease in such situations (which then would reduce the regular income of an apartment owner who would then pay actually less taxes).

Thanks.


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## kcowan (Jul 1, 2010)

My guess is that you must claim it if you are renting out the condo for income. If you are living in it, then no.


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## twa2w (Mar 5, 2016)

Logically the answer is no. The expenses of your individual condo unit are in no way necessary, nor did you incur them in order to rent out the roof of the building to a cell phone company. Does the cell phone tower occupy part of your unit?l
If I own a house with some land attached, I can rent out the land to a farmer but cannot deduct any costs related to the house. I may be able to deduct the portion of the taxes related to the land but that would be it.


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## prostoprosireno (Mar 7, 2016)

kcowan said:


> My guess is that you must claim it if you are renting out the condo for income. If you are living in it, then no.


Thanks kcowan. Your answer makes sense but here are a couple of points that really make me wonder:

1) The Strata Council (and all owners) wanted this cell tower income to be deposited directly into a Replacement Reserve Fund (which would help the owners down the road to spend less of their own money when a special levy is discussed) but that is something CRA apparently does not agree with - as we, the owners, were told by Strata Council and Strata Management Company. 

2) Yes, I understand that CRA wants somebody to pay tax on that income for a cell tower lease but if I am "forced" to pay tax on a cell phone tower lease income and if I have to present that income as rental/lease income then logically I should be able to apply some expenses against such rental/lease income (otherwise this income should not have to be reported as rental/lease income; it should have been reported as "Other Income not reported on T4s" and discussion would be over but the Strata Management Company specifically states in a letter sent to the owners that this income is to be reported as rental/lease income and that was confirmed by Strata Management Company representative during AGM - apparently direct instructions from CRA).

I am going to contact CRA, of course, but wanted to check here first to see if anybody else has the same "problem". Strata is supposed to be a non-profit organization but non-profit organizations are certainly allowed to have income/revenues which directly offset the expenses. Being new to Strata Property Act and other regulations it will take me some time to learn about all those details but it seems exceptionally strange to me that a cell tower lease income can not be to put directly into a Replacement Reserve Fund.


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## prostoprosireno (Mar 7, 2016)

twa2w said:


> Logically the answer is no. The expenses of your individual condo unit are in no way necessary, nor did you incur them in order to rent out the roof of the building to a cell phone company. Does the cell phone tower occupy part of your unit?l
> If I own a house with some land attached, I can rent out the land to a farmer but cannot deduct any costs related to the house. I may be able to deduct the portion of the taxes related to the land but that would be it.


Thanks twa2w. I saw your reply after I replied to the first comment. I understand your point, absolutely, and that is why I said that we should report this income as "Other Income not reported on T4s" but the Strata Management Company insists in a letter sent to the owners that such income is to be reported as Rental/lease Income which is very strange.


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## kcowan (Jul 1, 2010)

If the CRA wants you to claim it as income, then I would do it that way.


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## heyjude (May 16, 2009)

I live in a strata. We don't have a cell phone tower, but we have a guest suite and some parking spaces that we rent to residents. The income is documented in two line items on the operating statement. The funds contribute to the bottom line of the strata as a whole. I believe this is the normal way of handling strata revenues from common property.

OTOH, I also have a vacation property that has an owner's association. Net revenues from renting the property to guests are distributed to owners in proportion to their contribution to the rental pool. These revenues must be reported to CRA as income.


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## twa2w (Mar 5, 2016)

prostoprosireno said:


> Thanks twa2w. I saw your reply after I replied to the first comment. I understand your point, absolutely, and that is why I said that we should report this income as "Other Income not reported on T4s" but the Strata Management Company insists in a letter sent to the owners that such income is to be reported as Rental/lease Income which is very strange.


Other income not reported on t4 refers to employment income. The cell phone company is renting space from the owners ( condo assn)-it is not paying you an income for work done.
This is very clearly rental income. The condo board flows that rental income through to the owners as they cannot retain this income. You did not incur any expense in obtaining this income nor did did you forego any space in your condo so you have no expenses to write off against the income.
This all goes to how a condo Corp is structured under the law as a non profit. If the condo board took the income into their books, they would have to show it is income and they would not be able to write off anything against it either. They would have to show it as a profit thus voiding the non- profit status. Hence the flow through to you.
This is a way the condo board helps offset your condo fees. But because it is income there is tax.


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