can increase the amount of capital gain when you sell.
One way to mitigate this is to always keep track of passive activity losses. While they may not be deductible while you own the property, they are when you sell it, which means the amount you’ll owe will be less. By the way, if you’re thinking, “Well, I just won’t claim depreciation, then,” I’m sorry to tell you that this simply won’t work. The CRA states that the recapture’s calculation is based on “allowed or allowable” depreciation, meaning that even if you didn’t claim it, you’ll still have to pay it. You might as well get the deduction while you can, and perhaps consider setting it aside for when you do end up selling the property. Conclusion: Incorporating corporations into your real estate investment strategy in Canada offers a powerful tool for protecting assets and optimizing tax efficiency. By understanding the benefits of utilizing corporations and structuring your investments accordingly, you can mitigate risks, enhance returns, and achieve long-term financial success in the dynamic world of real estate. Through careful planning, strategic execution, and professional guidance, you can build a resilient and tax-efficient real estate portfolio that withstands market fluctuations and creates lasting wealth for generations to come.
Example 1: Asset Protection
Imagine you own several rental properties in Canada, each generating substantial income. By holding these properties within a corporation, you create a legal barrier between your personal assets and potential creditors.
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