16 — Wednesday, March 24, 1999 — North Shore News
north shore news

<2 BUSINESS
Revenue Canada Strikes home

BUY a home. Spend
perhaps 120 hours to fix
it up while you iive
there. Your efforts result
in a profit of $12,000
when you sell.

There’s normally no tax
when you sell a principal resi-
dence ‘and make a profit. In
effect, you have been earning
$100 an hour, tax-free.

Great strategy, right? Well,
Revenue Canada knows all
about this approach. Even if
you cite non-tax reasons for
your moves, you'd better have
a strong case.

Last month’s budget didn’t
change many tax planning,
rules, (The major exception: a

proposal to tax family trust
Aiivtdends paid to minors at

the highest rate.)

So as you file your 1998
return and lament all the tax
you paid, plan now to lower
that tax bill this year and in
the future. But do it carefully,
because Revenue Canada is
getting tougher.

You have probably heard
the tax department is taking a
closer look at deductions
claimed by the self-employed.

Now Don Goodison, a

partner of Kemp Harvey
Goodison, certified general
accountants, notes in his CGA
Magazine column Revenue
Canada has scored a victory
against the buy-improve-sell
strategy to produce tax. free
gains from a principal resi-
dence.

Many people take advan-
tage of or at least think about
buying « home, fixing it up
while living there, chen selling.

Berween 1989 and 1993,

Jeffrey Watson bailt four hous-

es, lived in them with his fami-
fy, ther sold them, Revenue
Canada challenged two of the
sales, oa which he made -—
but paid no tax on -— profits
of $20,000 and $26,000.
Watson cited non-tax rea-
sons for his moves. One house
was on a busy street in front

een

with a steep gully at the back;
another was on a biind curve.
Watson said he feared tor his
children’s safety.

But Revenue Canada
pointed out Waison knew the
Properties were on dangerous
streets when he bought them.

So if you consider the pre-
ceding strategy, be prepared to
defend your case on the fie-
tors Revenue Canada checks,
including the nature of the
property sold, length of own-
ership, frequency of similar
transactions, work dene on the
Properties, reason fer selling
and motive.

— Coprright 1999 Mike
Grenly

Mtke Grenby is a columnist
and independent personal
financial adviser; e-mail
emike@qrenty.com>.

Ne OO Z GS CS

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