Athlete/Investor · Squamish, British Columbia · Member since 2015 · 29 posts · 15 votes
Last week I was told to consider having my properties in a holding company. I'm not really familiar with this, I'm guessing it's having them under a corporation to limit liability and pay lower taxes? I have 4 properties now, so wouldn't transferring the properties to a corp. trigger any capital gains tax?
Does anyone have any experience with this and can shed some light in this?
Rental Property Investor · Hamilton, Ontario · Member since 2016 · 285 posts · 181 votes
9y
@Matt Belzile There's a lot of questions about Hold Cos for rentals. I'm currently at 6 properties and they're all run in personal names. My accountant who also owns properties always recommends moving them to a hold co.
Here's the issue. In Canada the lending is extremely tight, if you want to re-finance you're going to have a lot more trouble getting a good lender to refinance anything out of a hold co. In addition you'll still need to use your personal income to qualify for the refinance.
For me at this point it hasn't made sense to do it, despite accountants (who make more money on business taxes recommending it). Not that the accountants are malicious they just might not be aware of the lending environment.
Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes
9y
Does the person that told you this own property?
The short answer is no (to all. Including the tax question. Transferring from yourself to a "holding company) has the same tax effect as taking $10 from your left pocket and moving it to your right.
I have individual properties in LLCs as it was a requirement for a Freddie refi. But my original SFHs (which I still own) are in my name
Rental Property Investor · Hamilton, Ontario · Member since 2016 · 285 posts · 181 votes
9y
@Matt Belzile There's a lot of questions about Hold Cos for rentals. I'm currently at 6 properties and they're all run in personal names. My accountant who also owns properties always recommends moving them to a hold co.
Here's the issue. In Canada the lending is extremely tight, if you want to re-finance you're going to have a lot more trouble getting a good lender to refinance anything out of a hold co. In addition you'll still need to use your personal income to qualify for the refinance.
For me at this point it hasn't made sense to do it, despite accountants (who make more money on business taxes recommending it). Not that the accountants are malicious they just might not be aware of the lending environment.
Rental Property Investor · Toronto, Ontario · Member since 2012 · 538 posts · 298 votes
9y
Matt,
This is really a conversation to have with a knowledgeable (in US <-> CDN) tax accountant and you are going to have to be more specific regarding how you currently hold them and where the new holding company will be.
Some basic points
- If you own the properties personally or just in a (or multiple) LLC, you will pay US taxes and then CDN taxes every year; no options.
- Similarly, if you set up a CDN holding company and it owns the houses or LLC, again full income taxes are paid on both sides of the border.
- Putting the properties in a US 'C' corp (with LLC's or not) gives you the flexibility to decide when profits from the 'C' corp are repatriated. You still pay full US taxes but if defer the CDN taxes until you bring the funds 'home'.
In reverse, this is basically what Apple and many other US companies are doing in holding funds overseas; deferring their US taxes in the hope that eventually either rates will come down in general or some kind of onetime amnesty / reduced rate will be imposed.