Transferring investment property to a Canadian corporation is a complex process that involves various legal, tax, and administrative considerations. Below are some general guidelines that you may find helpful. Please consult with a Canadian tax professional, accountant, and lawyer before proceeding, as they can provide advice tailored to your specific situation.
1. Consult with Professionals:
Tax Professional/Accountant: Consult with a Canadian tax professional or accountant experienced in property transfers and corporate tax. They can help you understand the tax implications, including potential capital gains tax, and provide advice on how to structure the transfer to minimize tax liability.
Real Estate Lawyer: Engage a real estate lawyer to help navigate the legal aspects of the transfer, including preparing and reviewing the necessary legal documents.
2. Evaluate the Property’s Value:
Property Appraisal: Obtain a professional appraisal of the property to determine its fair market value. This is crucial for tax purposes.
3. Consider the Tax Implications:
Capital Gains Tax: If the property has increased in value since you acquired it, you may be subject to capital gains tax on the transfer.
Section 85 Rollover: Under Section 85 of the Canadian Income Tax Act, you may be eligible to transfer the property to your corporation on a tax-deferred basis. This requires filing an election and meeting certain conditions.
4. Prepare the Legal Documentation:
Transfer Deed: Your lawyer will prepare a transfer deed to legally transfer the property title to the corporation.
Purchase Agreement: Draft a purchase agreement outlining the terms of the transfer, including the purchase price, payment terms, and any other relevant conditions.
5. Determine the Payment Method:
Shares or Debt: Decide whether the corporation will pay for the property with shares, debt, or a combination of both.
6. Close the Transaction:
Execute Documents: Sign all necessary legal documents to execute the transfer.
Update Title: Ensure that the property title is updated to reflect the corporation as the new owner.
7. Report the Transaction:
Tax Filings: Ensure that the transaction is properly reported in your personal and corporate tax filings, including the Section 85 rollover election if applicable.
8. Consider the Ongoing Implications:
Tax Planning: Work with your accountant to plan for the ongoing tax implications of owning the property through a corporation, including potential changes to how rental income and expenses are reported.
9. Update Your Estate Plan:
Estate Planning: Consider how the transfer of property to your corporation impacts your estate plan, and update it as necessary.
10. Maintain Proper Records:
Documentation: Keep thorough records of the transaction, including appraisals, legal documents, and tax filings.
Transferring investment property to a corporation can provide various benefits, including potential tax advantages and limited liability. However, it is crucial to carefully consider the implications and seek professional advice to ensure that the transfer is done correctly and in your best interest.
