All Forum Posts by: Raj Singh

Hi there, 

For Canadian residents, I was wondering how the CRA treats accelerated depreciation income and 1031 exchange of commercial properties held under a C-corp in the US? Lets use a case study:

Property purchased for 3M, yielding 210k NNN.
Cost segregation study- allowing for depreciation of 210k in year one.

Net income post depreciation = 0. Taxes due in US = 0. 

1.  Is there any tax due to CRA?

2.  If there is a dividend or salary of 50k drawn from the C-corp for that year. How does the IRS and CRA look at this in that instance?

3.  If the property is sold 5 years later for 3.3M, having depreciated 600k by then and rolled into a 1031 exchange, what are the liabilities to CRA?

Thank you experts!

Hi there, we need recommendation for a tax attorney for foreign US green card holders incorporated in canada who owns commercial RE in the US. Any recommendations?

Basically needed to understand if deductions for accelerated depreciations on rental income in the US translate into tax credits when filing is done in Canada as well? Thank you.

One of our tenants with a substantial lease is a corporate dental chain that asked for 3 months free now with lease added 3 months in the end of lease at 8 years. They cited force majeure due to state banning non emergent dental offices forced to close. We held off on agreeing to anything to see when things would open up. One month later this office opens up for emergencies only. So initial claim no longer applies. Where we settled was they get 3 months off now, but every cent off paid back July 1 on top of regular rent amortized over 12 months. Both parties felt this was reasonable.

A C corp I own owns a NNN lease with 7.6 years remaining to a regional dental provider. It is fully paid off building located in Detroit area, generating about 140k/yr net. I was thinking of refinancing and pulling some cash out as downpayment for another property.

What are the profile of banks/unions I should approach? What is the expected rate and how much of the building price would they refinance for? Thank you in advance.

@Joel Owens Thank you for your insight and all the work you put in. I PM"ed you on specific details and thank you again.

@George Somaru Absolutely, I will keep you and everyone posted.

The interview is to get a sense on how business is and waht the likelihood is for renewal. Im in healthcare myself and do have some benchmarks we can use to estimate success. I dont think the owners which is a private REIT would be able to provide that assessment accurately, bias notwithstanding

7.8

@Justin Abdilla thank you for your input. Its a single tenant single building NNN lease, corporate guarantee.

@Greg Dickerson Thank you for input Greg. It is very helpful. I am relatively new in the field but in my research and reading around due diligence saw this being noted everywhere and it made sense to me - particularly in single tenant leases which space is quite dependent on tenant factors. I was comparing my checklist with the sales and purchase agreement currently being negotiated and realized it was not implied which is where the question arised from. 

https://www.partneresi.com/sites/default/files/partner-commercial-real-estate-due-diligence-checklist.pdf

https://www.youtube.com/watch?v=pACsqWaju_E

https://askthecommercialexpert.wordpress.com/2010/04/15/commercial-property-tenant-due-diligence-secrets-2/

These are some of the links of the online stuff I looked into. I realize these are ofcourse simply just references and personal opinions of different parties..

I am looking to close on a NNN property. I find it a bit highly priced psf (370 psf) but reasonable based on tenant profile and ROI. its basically 7.1% ROI of a national dental chain in Southfield MI paying about 25++ psf with escalations and 7.8 years remaining.

Since this deal is clearly predicated on tenant strength, one of the stipulations I requested for prior to executing the s&p agreement is to allow for a tenant interview and to review tenant financials to assess likelihood of tenant renewing. 

I was advised by my realtor and lawyer this is not commonly requested. Almost made to feel this was an odd request and "Ordinarily, in all commercial leases, theres is a provision with respect to a renewal option that the tenant must exercise with in a stipulated period prior to the expiry of the lease. I assume, that is likely the case in this lease as well. We will certainly have the opportunity to review all this during the due diligence period."

We do have a copy of the lease and there is options to renew, but ofcourse these remain tenant options. My confidence of easily renting it out at the end of expiry at the current entry price to maintain the same NOI is not high should tenant not renew.

Are my requests entirely out of the ordinary? At 2M+ price tag, Id have imagined tenant interviews are reasonable, particularly in tenant dependent leases.