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curious
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Re: Perspectives on unfin bsmt. better to do legal or not

Thu Jul 21, 2011 6:11 am

How about taxes on sale?
If a part of the house is an income producing rental unit, after sale, shouldn't that part be taxed for a capital gain?
 
thirdlittlepig
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Re: Perspectives on unfin bsmt. better to do legal or not

Thu Jul 21, 2011 6:43 am

It depends, you need to consult a tax expert before you make renovations put in separate electrical hook up deduct expenses etc. to find out the pros and cons of each approach.
 
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instigator
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Re: Perspectives on unfin bsmt. better to do legal or not

Thu Jul 21, 2011 6:48 am

Doing it legit is not that difficult as long as you have the ceiling height and can satisfy parking issues (City of Vancouver that is).
You will have to do more some work with regard to sound proofing and fire separation between the suite and the main house space.
And if you have an unfinished basement - you should look at adding a separate electrical meter with Hydro so the tenant pays their own bills. No more bill sharing.
good idea about the extra meter thing and the other ideas too thanks
 
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instigator
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Re: Perspectives on unfin bsmt. better to do legal or not

Thu Jul 21, 2011 6:49 am

How about taxes on sale?
If a part of the house is an income producing rental unit, after sale, shouldn't that part be taxed for a capital gain?
shhhh...let's not open that can of worms :wink: :P
 
curious
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Re: Perspectives on unfin bsmt. better to do legal or not

Thu Jul 21, 2011 7:31 am

There might be some concerns. If an owner installs a separate electrical meter with Hydro etc, there is a question: what is the owner's intention about that property?
A separate electrical meter might be an evidence that an intention is not a personal enjoyment, but there is a busyness activity. Logically, income producing property has to be taxed as a capital gain when sold.
 
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jesse1
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Re: Perspectives on unfin bsmt. better to do legal or not

Thu Jul 21, 2011 8:08 am

So out of curiosity how at risk are you with a semi-legal suite? Does anyone know of a situation where an illegal suite has caused financial hardship for the owner?

I do. Detached house turned into 4 separate entry suites when owners vacated. One tenant got on bad terms with the owners and reported to the city. The city required eviction until by law infractions were resolved. Owners sold the place, it was torn down and rebuilt. The new house has 2 semi-legal suites in the basement lol

That's just one story but I don't know how common these are in the grand scheme. Personally I would make it legal but I'm fastidious; most others I know have gone for years with semilegal and no problems yet. They sleep well at night but maybe ignorance is bliss.
 
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instigator
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Re: Perspectives on unfin bsmt. better to do legal or not

Thu Jul 21, 2011 9:55 am

yea, the difference between a rec room and a suite is a stove. say you decided you no longer wanted to rent it out. or you only wanted short term higher priced vacation rentals say a couple weeks or a month at a time. you didn't want full time occupancy.

you would open a whole can of worms for the greedy govt's fingers to keep spying and exerting power over you if you are too forthcoming with this.

i don't trust them. they can screw you over royally and easily and there's not much you can do.

i figure it will cost me a bit over 30k to finish the basement, to frame the partitions, plumb it, electric, paint, fixtures, flooring. i could even go cheaper with some DIY and bargain hunt the materials

is the tax write off on $20-30k that worth it to go legal?

i still prefer to finish it as a rec room with a bar and get all permits for that but not let on about it being a part time suite.

that's my feeling anyways.

i'm still open to more opinions and suggestions thanks everyone

i'm not dismissing anyones ideas, just would like to hear them all thanks
 
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Re: Perspectives on unfin bsmt. better to do legal or not

Thu Jul 21, 2011 10:17 am

You'll get better advice with an address and pictures.
the dogs bark but the caravan moves on
 
VanLord
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Re: Perspectives on unfin bsmt. better to do legal or not

Thu Jul 21, 2011 5:23 pm

There might be some concerns. If an owner installs a separate electrical meter with Hydro etc, there is a question: what is the owner's intention about that property?
A separate electrical meter might be an evidence that an intention is not a personal enjoyment, but there is a busyness activity. Logically, income producing property has to be taxed as a capital gain when sold.
are you an accountant? according to several tax accountants I have spoken with, this is simply not true. The house, with or without suite is considered primary residence. Perhaps if it were a legal duplex that would be different, but a income producing suite doesn't generate a capital gain.

Also having a legal suite, certified by the city and claiming the rental income on your taxes are two different things.
 
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Re: Perspectives on unfin bsmt. better to do legal or not

Fri Jul 22, 2011 11:10 am

VanLord is correct... 99% of the time there is no taxable capital gain on the sale of a principle residence even if there is a legal or illegal suite in it.
Also having a legal suite, certified by the city and claiming the rental income on your taxes are two different things.

Also correct. I have seen large tax implications to people not claiming their rental income. Funny thing is once you deduct all the eligible expenses there is usually little or no net rental income and therefore no tax owing. So the morons not claiming the rental activity then get reassessed by CRA, can't prove the expenses or CRA won't allow them, and end up paying more tax then they would have if they had reported the activity. Plus they get to pay interest and penalties on top of the tax. Honestly I never feel sorry for these people because when someone doesn't pay their share of tax it means the rest of us pay more than our share.
 
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instigator
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Re: Perspectives on unfin bsmt. better to do legal or not

Fri Jul 22, 2011 1:31 pm

it all depends which side you are on. if you are on the gov't side, the part time landlord is the scammer.

if you are a part time landlord, the gov't is the scammer. it works both ways.
 
franksin
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Re: Perspectives on unfin bsmt. better to do legal or not

Fri Jul 22, 2011 7:58 pm

... Funny thing is once you deduct all the eligible expenses there is usually little or no net rental income and therefore no tax owing...
I find that their is quite a bit of income and thus tax, as I cannot deduct CCA due to it being my principal residence and I have no mortgage interest to deduct.
 
franksin
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Re: Perspectives on unfin bsmt. better to do legal or not

Fri Jul 22, 2011 8:03 pm

Interestingly, one could have a legal suite and a laneway house in their principle residence. It would be zoned as single family and should still be exempt of the capital gains on sale.
Does CRA have any guideline on how much of your principle residence that you can rent out?
 
MikeStewartRealtor
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Re: Perspectives on unfin bsmt. better to do legal or not

Sun Jul 24, 2011 5:37 am

I'd go legal.

It'll be better for re-sale (buyers like permits as do insurers) and the City has made it easier with the new rules to build or create them legal.

Whats the basement ceiling height?

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