# Selling personal vehicle to one's own company



## steakman

I have a 2006 GMC diesel truck. I have just "sold" it to my company for 18,500.
I understand that I cannot claim any CCA this year..??

Also as it is a used vehicle what dollar amount do I use in calcualting CCA next year.? Do Ineed to use the original purchase price... seems kinda weird to have to do that.?

Thank you,

Stk


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## Brenner

How did you determine the price of $18,500? Assuming no use of special elections, typically transferred in assets into your business is done at FMV at the time of the transfer regardless of what you paid yourself for it. That FMV amount is what you would add to the proper vehicle class, not the original purchase price, and you can actually claim CCA in the first year. To determine the FMV probably just find some Autotrader ads of similar trucks (same make, year, condition).


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## Charlie

"You" can't claim CCA personally if you were previously entitled to do so because you do not own the car at year end. But your company can. Value should be fair market value at time of transfer. Do check if you're triggering taxable auto benefits, and if you're required to pay a transfer tax. (Used to have pay Provincial Sales tax in BC for the transfer -- not sure if that applies still, or elsewhere).


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## kcowan

We when we got audited by CRA, it was not paying sales tax on equipment transfers that got us. And our CFO was ex PWC.


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## marina628

We are a marketing Company and purchasing a very expensive sport car in 2010 triggered an Audit.I am sure you have all seen cars with logos all over it and this was a statement for our business.Because my husband and I own 100% of the Corporation CRA even asked for proof we owned personal Vehicles and we had to show them bill of sales for them too.The car had 4000km and we had to make a log book for the car to show where we used it for business .18 months later it only has 9000 kms now as it is not the sort of car you would drive unless it is a nice sunny day.They disallowed the HST credit over $30,000 on the car even though the Car represents out 'Brand' and the Corporation does enough business in a year to purchase 20 of these cars .So don't miss anything on the paperwork as it can come back to bite you in the ***


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## steakman

As for transfer tax, to my understanding there is no such thing in Alberta. I asked at the registry at time of transfer of ownership if any taxes were owing, I was told no. As for FMV, that is what I used to calculate price. I am aware of "personal use" of company vehicle. However I am curious as to its status if it has full company markings on it and whether that has any bearing on "pers use". I am however still keeping mileage log and noting business miles only. 

As for CCA, that is something I had no plan for personal taxes..it was the business side asking.  Given I incorporated in late June I am going to assume that any CCA will be pro-rated and as such will only be able to claim 1/2 of what a full yr would allow.

Thanks guys/ladies.!


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## skiwest

Your first mistake is its GMC rather than Dodge:biggrin:. Every rig welders truck that I've seen is Dodge. I guess thats why your an inspector rather than a welder.:biggrin:


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## steakman

skiwest said:


> Your first mistake is its GMC rather than Dodge:biggrin:. Every rig welders truck that I've seen is Dodge. I guess thats why your an inspector rather than a welder.:biggrin:


Have welded for over 35 yrs. Journeyman ticket (Ab), Fitter for 3..and just got fed up with in shop BS. This beats the freakin daylights outa working for some else by a long shot. Contract is the way to go in the patch.

As for my preferred ride: Well...all I can say is:

367,450km - *Zero* Engine issues - *Zero* Transmission issues (6spd Allison) - *Zero* Injector issues - 2ndary oil filtration/3 fuel filters w/lift pump, banks..and a bunch of other stuff that works for me. 

21mpg at 70mph. 

And best of all it makes me $$...

for a look see: http://www.dieselplace.com/forum/vbpicgallery.php?do=hall&u=55782

Next truck.? Denali HD.....loaded. ON lease of course eh.!

Cheers,


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## TaxGuy

Steakman:

1. Use the price you sold it to the company for…$18,500. However, you should try and ensure the price is something close the market value. If this is more than you paid for the truck, you will have a gain to report personally. If there is a loss, there is nothing to report or claim.

2. The corporation can claim CCA. In the first year, it would be half the regular rate (half of 30% or 15%). If this is the corporations first year, the CCA must be prorated by the number of days in the fiscal year.

3. If you were using the truck for business purposes prior to the sale, then you can claim CCA yourself but will have a disposition.

4. You may have to pay sales tax on the transfer if you were personally registered for the G/HST. If not, then there would be no issue.

Finally, you can sell it to the company or “roll-it over” in exchange for shares. I would suggest a sale and take a note payable from the company in return. The corporation can then pay you back.


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## Brenner

steakman said:


> As for CCA, that is something I had no plan for personal taxes..it was the business side asking.  Given I incorporated in late June I am going to assume that any CCA will be pro-rated and as such will only be able to claim 1/2 of what a full yr would allow.
> 
> Thanks guys/ladies.!


Remember that your corporate year end does not need to be December 31. You can pick any date. It is a little surprising that you incorporated without discussing these things with your accountant? Are you transferring other assets into the corp? As Taxguy mentioned there are special "roll-over" provision in the tax act when transferring assets into a corp in the first year of the corp, but typically they are utilized to defer any gains that would be triggered. Vehicles and equipment don't typically appreciate so I wouldn't worry about it.


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## skiwest

steakman said:


> Have welded for over 35 yrs. Journeyman ticket (Ab), Fitter for 3..and just got fed up with in shop BS. This beats the freakin daylights outa working for some else by a long shot. Contract is the way to go in the patch.
> 
> As for my preferred ride: Well...all I can say is:
> 
> 367,450km - *Zero* Engine issues - *Zero* Transmission issues (6spd Allison) - *Zero* Injector issues - 2ndary oil filtration/3 fuel filters w/lift pump, banks..and a bunch of other stuff that works for me.
> 
> 21mpg at 70mph.
> 
> And best of all it makes me $$...
> 
> for a look see: http://www.dieselplace.com/forum/vbpicgallery.php?do=hall&u=55782
> 
> Next truck.? Denali HD.....loaded. ON lease of course eh.!
> 
> Cheers,


no worries... just pulling chain.... though I would have to say almost every rig welders truck has been a Ram that I have seen in the patch


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## steakman

To answer some questions..

My corporate yr end is Oct 31. didnt have an accountant prior to incorporating..do now. 

As for what I paid for this truck..it was well over dbl the $18,500 I sold it for. $18,500 is _very_ FMV for this unit. On the outset it may look high given the mileage..but factor in the added options and modifications...a deal.

I did not have a BN/GST account prior to incorporating.

What I am now doing is taking 2K monthly on the balance owing on the truck. 

I have discussed CCA with him and we will do what we can this year...likely wont amount to much, given it will be 4 months all told, but I'll take whatever tax deduction I can.


What I would also be curious about is this. Accountant tells me I can pull 40k annually (10K/qtr) in dividends. But I am unclear whether this is fully tax free or not on the personal side. I do believe that monies is still taxable ont he compnay side at the nomial rate. 

For myself, I am not inclined to do so simply because if I have to pay taxes (which we all do), then trying to blatantly screw the Guvmint is not a good thing...CRA can be a nasty bunch and I am fully aware that they have significant power...significant. As such I am going the payroll route..which works just fine for me.

However I'd like to give my wife who holds shares in the company, dividends...say 16-20k annually. She does work and earns 50k annually. 
Will these dividends be taxable to her and if so at what rate.?

Thanx,

stk


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## Brenner

Yes these dividends will be taxable on your personal returns, for both of you, assuming the dividend is paid out of regular corporate income. 

It is perfectly acceptable to pay dividends only. Basically you (or rather your accountant) should run some simulations given your situation, other sources of personal income etc., and determine the right mix of salary and dividends. Usually it is best to start with salary up to a certain point (often to reduce the corps taxable income to zero) and then switch to dividends if you have excess cash in the corp that you need. But this is highly dependant on your situation, income levels in and out of the corp, and your goals. There are advantages and disadvantages to each. For example, you need employment income (dividend income wont count) for creating RRSP contribution room.

Do you and your wife own the same class of shares, or different classes of shares? Hopefully you had a smart lawyer for incorporating who gave you each different classes without restrictions so that you can pay dividends as you wish. If you both own the same class, say 50/50, then you have no choice and any dividends declared must be split 50/50. If you own different different classes of unrestricted shares you can split the dividend amongst the different classes as you wish, essentially picking who to pay the dividend too. This can be really helpful for income splitting and a great fully legal tax reduction strategy.


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## steakman

Brenner...actually I did not have a lawyer .. but assigned my self 200 "A" Shares, the wife got 100 "B" Both valued the same, and the kids got 10 ea "D" shares. Which reminds me..gotta change our will.!


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## Brenner

steakman said:


> Brenner...actually I did not have a lawyer .. but assigned my self 200 "A" Shares, the wife got 100 "B" Both valued the same, and the kids got 10 ea "D" shares. Which reminds me..gotta change our will.!


Nicely done.


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## TaxGuy

I would make sure that there was some form of consideration exchanged for the shares issued as a lawyer colleague of mine constantly tells me the biggest mistake made in corporations is the corporation not taking consideration for the shares and the corporation may be considered invalid.

The dividends paid are fully taxable. However, if you are only paid dividends from a private Canadian company and have no other income, the first $40,000 will have little to no tax.


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## Brenner

TaxGuy said:


> The dividends paid are fully taxable. However, if you are only paid dividends from a private Canadian company and have no other income, the first $40,000 will have little to no tax.


That is not really true at all. When you own the private corp you need to consider the total tax paid, both within the corp and on the personal side. That is why I said you, or your accountant, need to run calculations for several scenarios. Start with all salary, then try all dividends, then some of each until you hit the sweet spot. An accountant usually can run this easily in with their tax prep software, with all your other relevant info, to get the best results.


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## steakman

Tax Guy.. By "*considerations*" I am going to assume that means that the shares are fully & duly paid for ..? ie; actual dollar amounts deposited into the corporations bank account with copies of said cheques and bank deposit slips...??

*Done* & logged on paper into my 3 ring binder, scanned as .pdf's onto my new MacBook Pro (what a freaking awesome machine..btw.!), and saved in my 2TB backup.! 

..all good as long as that is what you _meant_ by considerations eh.?

Stk


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## Pop Alexandra

How did you manage the sale/purchase? 
Could you summarize the steps for me?


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## Mukhang pera

Well Pop, this thread died out in 2012 and steakman's last post on the forum was in 2013. What do you suppose are the chances he'll return to answer your question?


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