June 17, 2013 Issue 73

Rob GolfiSales Representative

HOME EVALUATION NO COST • NO OBLIGATION

905-575-7700 • 905-945-0188

WHAT’S INSIDE:

Can you Avoid Capital Gains Tax?PAGE 8

HOMES FOR SALEHamilton, Stoney Creek, Ancaster,Dundas & Glanbrook ListingsPAGE 9

HOMES FOR SALEGrimsby, Lincoln, WestLincoln & Niagara ListingsPAGE 5

June 17, 2013 - Vol 52b

8 Kidd Avenue, Grimsby, ON See page 5 for details.

The Golfi Team Real Estate Market Watch June 17, 2013

www.GolfiTeam.com

About Rob Golfi

Since the inception of his career in 1997, Rob Golfi has

recognized that understanding his clients’ needs is essential

to providing excellent service. Married 25 year with four

children, Rob understands a family’s wants and needs.

As business grew, Rob assembled the Golfi Team in an effort

to maintain the same level of professionalism clients have

come to expect. Shortly thereafter in 2003, the team received

the prestigious honour of being among the top 100 Real

Estate Teams for RE/MAX Canada, and this status continues

to date.

Rob’s experience and aggressive negotiating skills have

earned him every major honour awarded by RE/MAX,

including President’s Club, 100% Club, Platinum Club,

Chairman’s Club, Hall of Fame in 2003, the Lifetime Achieve -

ment Award in 2006, his SRES® designation in 2009 and the

Diamond Club Award in 2010. Having worked with many of

the industry’s professionals over the years, he has the

necessary edge to best negotiate the sale of your home.

Any agent can list your house, but Rob’s knowledge,

extensive marketing background and dedication gives clients

peace of mind when dealing with the single most important

investment in their lives. With years of combined experience,

the Golfi Team can provide your home with a level of

exposure that most agents cannot. Utilizing a team approach

also means that they will likely find a purchaser to buy your

home sooner, rather than waiting for other agents to

approach you with potential buyers.

Ranked in the top 5 of nearly 2,000 sales agents in the Hamilton-

Burlington and Niagara areas, listing with Rob and the Golfi Team

is the right choice when choosing someone to represent your

best interest.

Rob and Sue Golfi

How a House SaleRepair Clause led to a Law Suit

Most home sale deals are condi-tional on the buyer being satis-fied with an inspection. If the

inspector finds problems that are bigenough, the buyer usually wants themcorrected in order to go through with thedeal.

As the following case shows, if youare not careful about how you word therepair clause, you might end up in court.

In June, 2004 Mark Rosenhek agreedto pay Elizabeth and Angelo Breda $1.995million for their house on Doncliffe Dr. inToronto. The Bredas had built the home in1997 and lived there for seven yearsbefore putting it up for sale.

The agreement was conditional on ahome inspection. The home had two spotswhere the roof was flat, not sloped and theinspector noticed that water was poolingon the flat roof area. He noted the poolingcould later lead to leaks.

There were a few other small itemsidentified in the inspection, including abroken window, flue caps for the chimneyand some minor electrical repairs. Theparties revisited the sale agreement andRosenhek signed a waiver that said thedeal would proceed as long as the Bredasrepaired the deficiencies before closing.

The deal closed in September, 2004.Neither Rosenhek, nor his lawyer, askedbefore closing if the repairs had beenmade. After he moved in, Rosenhek didnotice when looking out a bedroom win-dow that water was ponding on the flatroof.

He did not contact the Bredas forthree years when a leak appeared in thedining room ceiling beneath the flat root.Rosenhek got a repair quote which was

more than $20,000 to replace the flatroofs with a sloping roof. He sued theBredas for the cost.

In a June, 2012 decision JudgeLaurence Patillo of the Ontario SuperiorCourt decided that any repair obligationsended when the deal closed. It was up tothe buyers to inquire about the status ofthe repairs and make any complaints on orbefore closing.

He accepted the Bredas’ evidencethat agreed-upon repairs had been com-pleted before closing.

Sellers, buyers and real estate agentsare sometimes confused about how todeal with repair obligations. The best wayis to get an estimate and give the buyer acredit for the amount on closing. Let thebuyer fix it after closing. Otherwise, thereare almost always arguments overwhether the work was done correctly.

Buyers are also often mistaken,thinking that they can hold back moneyon closing if repairs are not completed aspromised. In most cases, the buyer has toclose and sue for the cost of repairs later.If you want the ability to hold backmoney, then a clause must be inserted intoyour contract in the first place that saysspecifically that money will be held backuntil both parties, acting reasonably,determine whether the repairs have beenadequately completed.

Make sure you are properly protectedbefore signing any real estate contract, toavoid unnecessary court proceedingslater.

Mark Weisleder is a Toronto realestate lawyer. Contact him [email protected]

Record Number of Sales in May

The REALTORS® Association ofHamilton-Burlington (RAHB)reported a record 1599 sales of all

property types listed through the RAHBMultiple Listing Service® (MLS®). Theprevious record was 1598 sales in June of2009.

There were 2,268 properties listed inMay, a small increase over May of lastyear. All property sales increased by 3.4per cent over the same month last year.The average sale price of $423,542 wasan increase of 12.2 per cent from the pre-vious May.

“May was a stellar month for sales ofall property types,” said RAHB CEORoss Godsoe. “We started to see move-

ment in the market in April and that con-tinued through May, resulting in a recordnumber of all property sales.”

Seasonally adjusted sales of residen-tial properties were 1.5 per cent higherthan the same month last year, with theaverage sale price up 12.3 per cent for themonth. Seasonally adjusted numbers ofnew listings were 3.4 per cent higher thanthe same month last year.

Actual overall residential sales werethree per cent higher than the previousyear at the same time. Residential free-hold sales were 3.6 per cent higher thanlast year while the condominium marketsaw an increase in sales of almost one percent. The average sale price of freehold

properties showed an increase of 12.3 percent over the same month last year; thecondominium market saw an increase of14.1 per cent when compared to the sameperiod last year.

“The jump in the average sale priceshould not be taken as an indication thatthe Greater Hamilton, Burlington andoutlying areas have become unafford-able”, added Godsoe. “A closer look atthe sales activity in the various communi-ties which make up our market areashows a wide variety of price ranges.”

The average sale price is based onthe total dollar volume of all residentialproperties sold. Average sale price infor-mation can be useful in establishing long

term trends, but should not be used as anindicator that specific properties haveincreased or decreased in value.

The average days on marketincreased from 38 days to 39 days in thefreehold market but decreased from 44days to 37 for condominiums.

Year to date, listings are down 2.1per cent compared to the same period lastyear, while sales are 4.6 per cent lower.The average sale price for the first fivemonths of the year is 7.5 per cent higherthan the same period last year.

How The Golfi Team Did in 2012:✓ Number Of Homes Sold in 2012: 313 ✓ List Price To Sold Price Ratio: 98% ✓ Average Days On Market: 39

100%ClubAward Platinum

ClubAward Chairman’s ClubAward Hall of FameAward

LifetimeAchievementAward Diamond

ClubAward

Outstanding Team. Exceptional Results.

1998-2013 2002-2012

2003-2012 Inducted 2003

Inducted 2006 2010-2012

Burlington

WaWaterdown

Hamililton

StoneyCreekeek Grimsby

West Lincoln

Lincoln

WWaWain!eet Port Colborne

Pelham

Thorold

St St. CaCathathaa rines

NNNiagaNiagaara a on the Lake

Niagara Falls

Fort Erie

Welland

Freeeeleltonton

Duundas

Ancaster

Moount Hoopee

Bininbrookk

Burlington

Waterdown

Hamilton

StoneyCreek Grimsby

West Lincoln

Lincoln

Wain!eet Port Colborne

Pelham

Thorold

St. Catharines

Niagara on the Lake

Niagara Falls

Fort Erie

Welland

Freelton

Dundas

Ancaster

Mount Hope

Binbrook11HAMILTONBURLINGTON & NIAGARA

HAMILTONBURLINGTON & NIAGARA

RE/MAX TEAM IN CANADA20RE/MAX TEAM IN CANADA20

RE/MAX TEAM WORLDWIDE40RE/MAX TEAM WORLDWIDE40

Information based on recorded commissions paid between January and December 2012 from the REALTORS® Association of Hamilton-Burlington. Rankings are compiled from #gures submitted by regional and local o$ces.

RobGolfi

Sales Representative

SharonStafford


HeatherReid


HansMarcellissenSales Representative

WendyMurray-Nicholson


MikeMcNeil


KristinaKing


JohnHellicar


DanGolfi


LynnPage


June 17, 2013 The Golfi Team Real Estate Market Watch

Call Today 905-575-7700

FREEHOME EVALUATIONYour home could be worth more than you think!

Call the GOLFI TEAM

905-575-7700 • 905-945-0188

HOMEEVALUATION

THE GOLFI TEAM905-945-0188

Not intended to solicit properties currently for sale.

CALL TODAY

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791 South Service Road, Stoney Creek905-643-9982 • [email protected]

GRANITEKITCHEN COUNTER TOPS

SINK INCLUDED

AS LOW AS

+TAX$199000Crossword Solution

YTD Comparison Listed Expired Sold Average Selling Average Days Selling % ofAREA May 2013 / 2012 YTD YTD YTD Price on Market List Price

ANCASTER 2013 446 58 268 $469,743 55 98%

(DISTRICT 42) 2012 357 55 228 $451,249 47 98%

BURLINGTON 2013 1982 151 1344 $483,963 32 98%

(DIST. 30 to 36 & 38) 2012 1917 109 1499 $453,643 29 99%

DUNDAS 2013 186 9 149 $376,357 47 98%

(DISTRICT 41) 2012 187 20 172 $365,526 55 98%

GLANBROOK 2013 287 39 180 $333,328 64 98%

(DISTRICT 53) 2012 245 28 160 $338,649 52 98%

GRIMSBY 2013 264 34 167 $352,224 52 98%

(DISTRICT 54,55) 2012 257 37 183 $334,433 54 97%

HAMILTON EAST 2013 482 44 349 $203,865 38 97%

(DIST. 23,24,27,28,29) 2012 460 61 375 $197,739 46 97%

HAMILTON WEST 2013 417 37 277 $316,267 39 99%

(DIST. 10, 11, 12) 2012 441 43 344 $287,590 46 98%

HAMILTON MTN 2013 1018 92 784 $279,154 37 98%

(DIST. 15,16,17,18,25,26) 2012 1049 127 832 $266,338 41 98%

HAMILTON CTRL 2013 688 106 497 $172,281 44 97%

(DIST. 13,14,20,21,22) 2012 647 136 475 $160,395 47 97%

BEAMSVILLE 2013 112 9 73 $293,578 47 98%

(DISTRICT 981) 2012 96 22 70 $272,205 44 98%

WEST LINCOLN 2013 53 6 29 $392,947 77 97%

(DISTRICT 56, 982) 2012 50 7 29 $364,555 74 97%

SMITHVILLE 2013 46 3 27 $257,249 55 97%

(DISTRICT 57) 2012 56 11 33 $274,648 69 97%

STONEY CREEK 2013 614 69 398 $325,929 41 98%

(DISTRICT 50,51,52) 2012 603 81 463 $313,351 49 98%

P R E S E N T E D B Y T H E G O L F I T E A M

Municipal Year-to-Date StatisticsMay 2012 vs May 2013

Based on sales data on all home sales from May 2012 vs May 2013, REALTORS Association of Hamilton-Burlington

Call Today 905-945-0188


Rob Golfi*

Grimsby, Lincoln West Lincoln & Niagara

beAmsville $599,0004130 St. George’s Drive

New Hampton Model home! 3000 sq.ft. of pure luxury,loaded w/upgrades. Open concept w/hardwood, ceramic &porcelain flrs. Kitchen w/granite counters, glass backsplash& island. DR boasts coffered ceilings & wainscoting.Master bdrm w/double walk in closets & spa bathroom.

$2,265.33 per/mth P&i / O.A.C.

st. CAthArines $394,5008 Westport Avenue

Prestigious area, walking distance to Port Dalhousie. Impressiveopen concept layout. Main level has hardwood flooring, livingroom with a wood burning fireplace, large family room surroundseat-in kitchen w/plenty of countertops, cabinets, pot drawers &pantry storage. 2 patio doors lead to deck and private backyard.

$1,550.18 per/mth P&i / O.A.C.

West linCOln $359,9008530 Silver Street

CHARACTER HOME Circa 1865 – Sitting on 1.22 Acres,4 bedrm, 2 bathrms, over $200,000 in updates, beautifulpine plank flrs, large country size kitchen, updated vinylwindows, newer furnace & C/air, inground pool, 20x32 fthobby barn + dble car garage 15 min drive to Hamilton.

$1,436.73 per/mth P&i / O.A.C.

beAmsville $399,9004359 Tamarac Avenue

QUIET COURT LOCATION – This 4 bedrm 2 storey homehas everything you’re looking for, open concept, gorgeoushardwood floors in living/ dining room & family room, gasfireplace, 3 tier patio deck in landscaped back yard, newshingles in 2011, updated vinyl windows, & oversized lot.

$1,514.01 per/mth P&i / O.A.C.

beAmsville $989,9004895 Lister Road

WATERFRONT ON 1 ACRE: This 3450 sqft. custom builtraised ranch features a self-contained in-law with separateentrance, all brick construction, large 22x22 patio deck,finished basement with walk out & extra bedrms and baths,and workshop. Shore protection in place.

$3,743.66 per/mth P&i / O.A.C.

vinelAnd $229,9003956 Durban Lane

Adult Lifestyle custom built home backing onto greenspace.Open concept, hardwd & fireplace in living room. Walk-outto multi-level deck, custom, extra deep garage withbackyard access. Home is on leased land

$869.45 per/mth P&i / O.A.C.

st. CAthArines $259,90055 Longfellow Avenue

Great Location! Features updated kitchen with backsplash,ceramic floors & walk-out to multi-level deck & children’splay center. Main floor complete w/5 pc bath, powder roomand 9ft. ceilings. Basement has ample storage, rec room withoption for additional bedroom and rough-in for bath.

$983.97 per/mth P&i / O.A.C.

vinelAnd $264,9003506 Rittenhouse Rd

Updated 3+1 bed bungalow with large living room, eat-inkitchen with 3 new appl. New roof 2012, newer furnace,CA, windows, exterior doors & maintenane-free facia,soffits & eaves. Basement re-done with large rec room &additionall bedroom.

$1,002.90 per/mth P&i / O.A.C.

Grimsby $265,00049 Cline Mountain Rd. S.

AFFORDABLE, & ADORABLE 4 BEDRM HOME –Features bright hardwood floors through-out, updatedkitchen with backsplash, separate dining room with slidingdoors leading to fenced and spacious back yard, shingles6yrs. new, mostly vinyl windows, finished rec-room inbasement, quick access to QEW.

$1,002.19 per/mth P&i / O.A.C.

Grimsby $649,900511 Main Street West

If quality is important, this house is for you! Custom builthome in 2004 sitting on ½ acre features maple kitchenw/granite counters, cove ceilings w/pot lights, Braziliancherry hardwd flrs, professionally finished basementw/fireplace, oversized dble car garage, concrete drive &back patio.

$2,457.83 per/mth P&i / O.A.C.

Grimsby $345,00020 Tami Crescent

BEAUTIFULLY MAINTAINED & UPDATED-Quiet courtlocation with easy access to QEW features custom kitchw/pine cabinets, gorgeous bamboo floors, updated bathrm,professionally finished basement w/wood fireplace & brickfacing, mostly updated vinyl windows, fenced yard, newshingles in 2008, furnace in 2005.

$1,304.74 per/mth P&i / O.A.C.

niArGArA-On-the-lAke $289,00038 Niagara on the Green

Fully finished w/loads of upgrades 3+1 BR townhouselocated in the beautiful Niagara on the Greenneighbourhood. Features dining rm, formal living rm, eat inkitch, main flr ldry, 3 BRs & 2 full baths on the upper level,finished basement complete w/BR, 4pc bath, & rec rm.Nothing to do but move in!

$1,092.62 per/mth P&i / O.A.C.

Grimsby $299,90048 Park Rd North

RENO DONE RIGHT!! Rebuilt from the studs, basically anew home!! Country cozy w/50x125 ft. lot & over 80 ft.driveway w/parking for 10. Located across from a park, this3 bedrm bungalow offers 1100 sq.ft. of updates! Show &Sell!

$1,135.41 per/mth P&i / O.A.C.

Grimsby $324,90026 Brierwood Avenue

AMAZING IN EVERY RESPECT IN THIS PROPERTY –Bungalow in immaculate condition, features beautiful oakkitch cabinets, gorgeous hardwd flrs, all vinyl windows,professionally finished basement with walk out to back yard,new shingles 2013, close to shopping & quick access to QEW.

$1,230.06 per/mth P&i / O.A.C.

beAmsville $312,0004084 Barry Drive

CLASSIC 3LVL SIDE SPLIT–sitting on large 68x128 footlot w/detached oversized double car garage, features sunroom addition, new shingles 2009, mostly vinyl window,oak kitchen cabinets, finished basement, updated bathroom,hardwood floors, & professionally landscape yard.

$1,179.94 per/mth P&i / O.A.C.

vinelAnd $499,9003905 Cody Trail

PRESTIGIOUS BUNGALOW WILL TAKE YOU BYSURPRISE! – This custom built has all the luxury you want& more! Hardwd flrs, custom kitch cabinetry w/stonecounters, breakfast bar, crown moulding, master bedrmw/rich hotel style ensuite, & covered patio. Still time for youto choose your colours!

$1,890.55 per/mth P&i / O.A.C.

smithville $444,90055 Las Road

PRESTIGIOUS BUNGALOW WILL TAKE YOU BYSURPRISE! – This custom built has all the luxury you want& more! Hardwd flrs, custom kitch cabinetry w/stonecounters, breakfast bar, crown moulding, master bedrmw/rich hotel style ensuite, & covered patio. Still time for youto choose your colours!

$1,684.38 per/mth P&i / O.A.C.

niAGArA-On-the-lAke $259,90024 Robertson Road

Updated throughout and located in a fabulous area! Thisproperty features an eat-in kitchen with pantry, hardwood,living room/dining room with gas fireplace, master withensuite and custom walk-in closet, fully finished lower levelwith wet bar and office. Updates include: shingles ‘12, newA/C ’11, concrete steps and side drive ’10. Unpack and startenjoying! $982.91 per/mth P&i / O.A.C.

beAmsville $369,5002705 Campden Road

One floor family living in serene setting. Home boasts 3+1bedrooms eat-in kitchen, huge basement rec room withwalkout to patio. Large above ground pool & oversizedgarage. Updated, windows, exterior doors, furnace, roof,pool & cistern.

$1,398.91 per/mth P&i / O.A.C.

Grimsby $329,9008 Kidd Avenue

CHARACTER AND CHARM – Fantastic 4 bedrm home inthe heart of Grimsby. New maple country style kitchen withstainless steel appliances, updated bathroom with claw tub,original oak & plank floors, updated shingles & plywood,mostly updated vinyl windows, new furnace 07, new wiring.

$1,248.99 per/mth P&i / O.A.C.

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For info: www.GolfiTeam.comemail: [email protected]: 905-575-7700

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Can you Avoid Capital Gains Tax?

When you buy real estate you expect that,over time, it will appreciate in value. If yousell that property for more than you paid,

you will have an appreciable gain in value and thistriggers a taxable capital gain for the Canada RevenueAgency (CRA).

According to my accountant, this isn’t necessar-ily a problem. His rationale: If you owe tax it meansyou’ve made money. And capital gains are taxed atonly half your marginal tax rate—one of the morefavourable tax treatments offered by the CRA.

The real quandary, for most readers, is how tocalculate this capital gains tax when the sale of theproperty is a tad more complicated than selling yourprincipal home.

For that reason, I address some of the moreinteresting questions readers have sent regarding thesale of property and how to calculate the taxes owedon their capital gains.

Claiming investment expensesRecently a reader, who had bought and rented

out a condo as an investment, asked if he could claimthe condo’s special assessment bill as an expenseagainst the potential capital gains tax he’d owe oncehe sold the condo.

“He’s mixing apples with oranges,” says AlbertLuk, lawyer with Devry Frank LLP, a Toronto-basedlaw firm. You can’t claim business expenses against acapital gain—you can only claim deductions againstbusiness income (or annual expenses against annualrental income). If you want to reduce your capitalgain you need a capital loss—such as selling stockthat dropped in value.

Every investor has to make a decision, saysLuk, either claim expenses and report the sale asincome, or eat the expenses and sell the property as aninvestment, enabling it to qualify for the preferentialcapital gains tax treatment.

I won a home!For the fortunate few, lottery wins are not tax-

able. That’s great news for one reader who wrote inasking how to calculate the capital gains tax on thesale of a home they won in a regional lottery.

“If you don’t already own a principal residence,the home can be sheltered from taxable gains throughthe principal residence exemption,” explains ScottPlaskett, president of IRONSHIELD FinancialPlanning, a fee-only firm in Toronto’s west-end.

If you already own a home, and decide to sellyour winnings, the CRA will calculate your capitalgains based on the difference in current market valueof when you won the home versus when you sold thehome. The longer you wait, the greater chance you’llowe capital gains tax.

“I had a client who won a home in the PrincessMargaret lottery,” says Plaskett. The client alreadyhad a principal residence and, though appreciative,wanted to sell the winning home quickly. The clientsold and paid no tax, as the capital gain was almost nilfrom when he won to when he sold. “He was just tiredof cutting the lawn.”

Renting out your basementMany readers want to know if their home will

continue to qualify for the principal residence exemp-tion if they rent out a portion of their house. Theirconcern is prompted by stories of people who lost thisexemption after years of renting out their basement.

While it’s true—you can lose your principal res-idence exemption—it really only happens if you rentout more than 50% of your home, or when you decideto claim capital cost allowance on the portion of yourhome that is the rental.

The CRA recognizes that, over time, deprecia-ble property will become obsolete. Believe it or not,this also applies to real estate. Because of this you arewell within your right to offset this loss in value bydeducting the depreciation over a period of severalyears. This deduction is the capital cost allowance(CCA). However, if you claim CCA on your home,you are effectively telling the taxman that this proper-ty is used to produce income, and you use lose theopportunity to claim a capital gain, which is taxedmuch more favourably than income.

But what if you buy a duplex or fourplex andlive in one unit while renting out the others? Can youdeduct costs, including CCA, to offset the rentalincome you collect each year and still claim a princi-pal residence exemption? Yes: but you’ll need toclearly document what portion is for personal use andwhat portion is rental. Only deduct expenses for therental portion. When you sell, you can claim the prin-cipal residence exemption for the portion that was forpersonal use. To understand how this all works, con-sider the following:• Buy a duplex for $400,000.

• Rent out one unit (for $1,500 per month) and livein another.

• Each year you report your annual rental income(about $18,000) and then offset these earningswith expenses associated with the unit.Remember: you cannot deduct expenses, includ-ing CCA, for the personal portion of the duplex.

• After four years you sell the duplex for $500,000.

• Because 50% of the property is used for personaluse, you can shelter 50% of the $100,000 capitalgain.

But be forewarned: CRA is cracking down onincome generated from real estate, and in order toqualify for the principal residence exemption no morethan 50% of a principal home can be used for rentalpurposes. For people thinking of buying and investinghomes with a personal use portion you may want toseek out professional advice.

Gifting property (and avoiding probate)In Canada, you can give gifts to loved ones

without tax implications (at least for the recipient).However, this doesn’t mean you can completelyavoid taxes when you gift money, stocks, shares orproperty. “There are tax implications on gifted prop-erty as the CRA sees this as a transfer of ownership,which is a deemed disposition,” explains Plaskett.

Still, many parents consider gifting propertyeither upon death or before (by adding adult childrento the title) as a great way to transfer property andavoid probate and other taxes.

“Because Canada doesn’t have a gift tax, likethe U.S., people often get caught in tax traps whenthey start gifting without knowing the implications,”explains Luk.

If a parent gifts an adult-child real estate, theCRA considers this transfer of ownership as a dispo-sition: a virtual sale of the property at fair marketvalue. As a result the parent will owe taxes on anyappreciable gain on the property (from when they

bought the property to when they gifted the property).The parent can avoid these taxes if the gifted proper-ty qualifies for the principal residence exemption.

However, the adult-child will have to pay capi-tal gains tax on the property should they decide to sell(and if they already own their own principal resi-dence). The quicker one sells, however, the lower thechances of a capital gain, and the lower the chances oftaxes owed. That’s because the capital gain is onlycalculated from the point of inheritance to the point ofdisposition. Add your adult-child to title years beforeyou die and you’ll simply be increasing the potentialfor a capital gain and for taxes owed on that gain.

“It gets even more complicated if you gift prop-erty to a spouse or a related minor child,” says Luk,where the gifter may be hit with “an unexpected taxconsequence known as the attribution rule.” This iswhen income, dividends and capital gains are attrib-uted back to the gifter. “The take-away is that not allgifts can be given tax-free, even if there is no gift tax,per se.”

Sever landAnother option some readers have considered is

to sever their land and to build two houses—keepingone home as their primary residence and gifting theother house to either a family member or the builder.

“This is a tricky timing issue,” says Plaskett.Anytime there is a change of use in a property theCRA considers this a deemed disposition. If the landoriginally housed their principal residence, then thegifters are sheltered from capital gains tax. However,the recipient—whether it’s a family member or thebuilder—would be subject to capital gains taxes ifthey built and then sold the additional home. Thatmeans if a builder built the two homes for $1.1 mil-lion, and then took possession of one and sold it for$750,000, the builder would owe tax on the $200,000capital gain. Worse: because of the builder’s profes-sion, this gain could actually be considered businessincome by the CRA, which eliminates the capital gaintax treatment on the sale of the house and forces thebuilder to pay his full marginal rate on the $200,000profit.

If, however, the recipient chose to keep andinhabit the home as their primary residence, this

would “make it a tax-free transaction,” says Plaskett.Anyone interested in pursuing this type of gift

should talk to a professional, as the CRA may havedifferent rules depending on whether you sever theland before or after you build the two homes.

One building, two uses (business and residentialunits)

Those interested in diversifying their type ofreal property holdings may have considered (oralready bought) a mixed residential/commercial unit.But when it comes time to sell there can be some con-fusion on how the capital gains tax will be applied.

“Whenever you have a mixed usage propertyyou want to keep meticulous records,” says Plaskett.“Particularly regarding the value of the building oreach unit during times of usage change.”

This will require owner to pay for an assess-ment or ask a realtor to provide a market comparisonanalysis and an evaluation of the fair market value ofthe building at each stage, says Plaskett.

By valuing each unit during each phase of use,you can determine your adjusted cost base (ACB)—atax term that refers to the change in an asset’s bookvalue.

For example, say you buy a home for $250,000and live in it for five years before deciding to buy alarger property and keeping your initial home as arental property.

Since you’ve changed the use of the initialhouse you are subject to capital gains taxes, but sinceit was your primary residence you can claim theexemption. This won’t work, though, when you go tosell this property a few years later. The good news:

You can reduce the taxes owed by determining yourACB for the property.

By obtaining a valuation of the property at thetime it stopped being your primary residence, you canshelter those capital gains from future tax repercus-sions. Here’s how it works:• Buy a home for $250,000 and live in it for five

years.

• Transition the home from residence to rentalproperty.

• At that time, obtain a fair market value report(either from an appraiser or a Realtor) that valuesyour home at $350,000.

• Sell the rental property three years later for$400,000.

• You will only owe tax only on $50,000, as theadditional $100,000 gain is sheltered using theprincipal residence exemption.

Now, it doesn’t matter if the property is separat-ed into different residential units, or commercial andresidential units, the same principles apply.

Be forewarned: the ACB calculation can get abit tricky. For instance:• You buy a duplex for $750,000.

• You move into one unit and rent out the other.

• A few years later you move out of your unit andrent it out.

• At that time you obtain a fair market value reportfrom a Realtor, which states that the property iscurrently worth $1 million.

• A year later you sell the duplex for $1.1 million.

In this example, only the $600,000 gain wouldbe taxable at half your marginal rate, says Plaskett, asthe principal residence portion of the building wouldbe exempt.

Whether or not you made money can get eventrickier if your ACB is lower than the current marketvalue of the asset. “Always ask yourself: what did youtake out of your jeans to invest,” says Plaskett. “Anddon’t forget: Anything you receive—whether it’sinterest, rental income, or dividend—is part of yourinvestment return.”

Tenants in commonWhen a married or common-law couple owns a

home together the ownership is known as joint tenan-cy. This allows for the automatic transfer of the prop-erty to a surviving spouse without penalty or priorpaperwork. (As with anything, this arrangement getsmore complicated when you have a mixed or blendedfamily.)

Yet, when adult children inherit a property theybecome tenants in common. This type of ownershipallows two or more people to have equal ownershipinterests in a property. Unlike joint tenants, however,each can choose the beneficiary that inherits their por-tion of the property, should they die. Where appropri-ate, tenants in common may also choose to sell theirportion of the property, without consent from theother owners. And tenants in common ownership isnot limited to people who inherit property. Manyinvestors also opt for this type of ownership whenthere are two or more investors in one property.

When it comes to calculating tax, though, eachtenant in common is on their own. “Everyone hastheir own adjusted cost base,” says Plaskett.

For instance, if two adult children inherit aproperty with a fair market value of $1 million andthen rent it out, their adjusted cost base would be$500,000 each. A year later, investor A sells his por-tion of the property to investor B for $750,000. Wheninvestor B sells the property for $2 million, she willonly pay half her marginal tax rate on $750,000 of theprofit, because her ACB is $1.25 million ($500,000plus $750,000).

Inheriting international propertyIn Canada you’re required to report your world-

wide income and assets. Any profit earned on the saleof the foreign property is calculated in the same man-ner as non-primary residence property sold inCanada.

“Even if you own or inherit a home in Floridathat doesn’t mean you avoid taxes,” says Plaskett. Butthere are ways to avoid taxes on foreign property. “Ifyou put the property into a trust, so you don’t person-ally own the property, then you don’t have to worryabout the capital gains once you sell the property,”explains Plaskett. The trust will pay U.S. tax, but willbe exempt from Canadian taxation. Get expert help ifyou’re thinking of setting up a trust, however, as taxtreaties and legal methods of minimizing tax can getcomplicated.

Getting hitchedYou’ve fallen in love and you want to move in

together, but you both own your own homes, whatshould you do to minimize taxes?

“There are several options for a couple whereeach person owns their own principal residence but theywant to move in together,” says Albert Luk, lawyerswith Devry Frank LLP, a Toronto-based law firm.

The first option is to sell one of the homes. Thisperson could claim the principal residence exemptionand avoid paying capital gains taxes. But to qualifyfor a principal residence exemption you will have tosell the home before getting married (or moving intogether). Under tax laws a family unit can designateonly one property as their primary residence—and afamily unit includes spouses and all dependent chil-dren.

The second option is to convert one home intoan income producing property by renting it out. Youwill trigger capital gains taxes but only from the timeyou started renting out the property to the time youactually dispose of the property. That’s because theCRA considers the change in the use of the propertyas a deemed disposition—tax talk for a change in useof a property is the equivalent as a sale at the current,fair market value.

If you opt to keep the second home as anincome property you can minimize the taxes owed bykeeping good records. “Get an appraisal or a propertyvaluation just before you change the use of the prop-erty,” says Scott Plaskett, president of IRONSHIELDFinancial Planning, a fee-only firm in Toronto’s west-end. That way when you go to sell the home, the cap-ital gains tax will be calculated from the time thehome became a rental property, not from when youfirst purchased the house.

Getting divorcedA few readers ask what the process is for calcu-

lating capital gains tax on a home that was part ofdivorce proceedings.

If the divorce is short and sweet—and both par-ties have vacated the home in order to quickly sell theproperty—then taxes would only be owed from thetime the home stopped being a primary residence forthe couple until the time the property sold.

The longer it takes to sell the property thegreater the chance for potentially higher capital gainstaxes being owed. (The assumption being that theproperty will appreciate over time.)

If, however, one half of the couple continues tolive in the property and chooses to buy out the otherhalf, there will be no capital gains tax owed as thehome is still being used as a primary residence.


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hAmiltOn mtn $159,90036 Poplar Avenue

LOCATION, LOCATION! Walk to Juravinski, steps tomountain brow and shopping. Loads of character andperfect for a young couple! This property features beamedceilings, private back yard, front and back porch, updated100 amp panel, and kitchen. Great rental location!

$638.67 per/mth P&i / O.A.C.

hAmiltOn eAst $169,900117 Fairfield Avenue

BUNGALOW WITH FAMILY ROOM ADDITION. Twogood sized bedrooms w/a large family room, lots of parking,updated windows, shingles, furnace, C/A, kitchen & wiring.Needs TLC in decorating & cleaning. Great Value. Close tohighway access & shopping.

$678.61 per/mth P&i / O.A.C.

stOney Creek $499,900177 Silverlace Circle

BEAUTY, WARMTH & VALUE – All brick, w/top qualityfinishes, maple kitchen cabinets w/granite counters &breakfast bar, hardwd flrs, fin. basement great for in-law,master bedrm suite w/additional rm - great for dressing rm,den, TV rm or nursery, & grand foyer w/spiral maple staircase.

$1,892.60 per/mth P&i / O.A.C.

hAmiltOn eAst $350,000867 Beach Blvd.

WATERFRONT LOT 42.50X149.00 ft.! Build your dreamhome in trendy Beach Blvd backing onto the WaterfrontTrail, fully serviced vacant lot with sewers, water & gas tolot line.

$1,323.65 per/mth P&i / O.A.C.

hAmiltOn eAst $194,9002 Melvin Avenue

GARAGE MADNESS! This property features an oversizedbrick garage with hydro. Furnace and C/A are rental. Nicelot close to shopping and major bus line, minutes to Redhilland new Center Mall. Updated windows, wiring andplumbing.

$737.08 per/mth P&i / O.A.C.

binbrOOk $384,90092 Windwood Drive

Amazing space in this fabulous 2100 sq.ft. home, featuresopen main floor plan, formal dining rm, showcase gasfireplace in family rm, family size kitch w/patio doorsleading to party size deck & fenced in yard, master bedrmw/walk in closet & ensuite w/relaxing roman tub, & finishedbasement.

$1,455.64 per/mth P&i / O.A.C.

AnCAster $539,90034 Norma Crescent

Fabulous 2 storey in fantastic location, features gorgeoushardwd in family rm w/wood FP & wet bar, main flr den,upgraded trim on main lvl, new carpeting & under-pad,freshly painted, patterned concrete drive & patio, newshingles ‘09, unspoiled basement w/good ceiling height &access to garage.

$2,041.83 per/mth P&i / O.A.C.

stOney Creek $359,90028 Sandy Drive

BIG HOUSE, SMALL PRICE, fantastic value in this 4bedrm all brick executive home, features gorgeous hardwdflrs, updated kitchen with glass backsplash, new shingles(07), new furnace (12), vinyl windows, finished basement,sunny sunrm addition, & concrete drive. Close to parks,schools & QEW.

$1,361.09 per/mth P&i / O.A.C.

stOney Creek $479,90055 Chiara Drive

SPECTACULAR 4+1 BEDRM - Shows like a dream,features oak kitch w/granite counters & back splash, hardwdflrs w/oak staircase, master bedrm w/2 walk in closets & spastyle ensuite, professionally finished basement, &landscaped yard w/35x18 ft. 2 tier deck.

$1,814.91 per/mth P&i / O.A.C.

stOney Creek $439,90003 Riviera Ridge

Spectacular, luxurious & Immaculate best describes thisawesome beauty, features main flr den, beautiful hardwd ,ceramic flrs & new carpeting, large family size kitch,professionally finished basement, new c/air, shingles 5 yrsnew, private back yard quick access to QEW.

$1,665.45 per/mth P&i / O.A.C.

hAmiltOn eAst $229,900273 Tolton Avenue

ALL BRICK BUNGALOW WITH IN-LAW! Neat & cleanhome features mostly original hardwd on main level, largebright living rm, professionally finished basement w/new maplecabinets, sparkling bathrm , rec-rm & spare bedrm, shingles 6yrs new, new C/air, fenced yard & close to all amenities.

$870.39 per/mth P&i / O.A.C.

stOney Creek $389,90068 Mountain Avenue North

WHAT A DOLL HOUSE. Beautifully kept home in the heartof Old Stoney Creek, this cozy 4 bedroom home features in-law set up with separate entrance, many updates includeshingles 2012, furnace 2008, updated vinyl windows,beautiful wrap around porch, 25x22 dbl garage/workshop.

$1,476.15 per/mth P&i / O.A.C.

stOney Creek $239,900690 Barton Street East

WHAT A DOLL HOUSE - Sitting on half acre lot close to all amenities,features updated country style kitchen with oak cabinets, farmers sinkand butchers block counter, Reverse Osmosis water filter, mostly updatedvinyl windows, shingles & furnace 1 year new, slate flooring, bright mainfloor laundry, and detached garage. Impeccably clean & maintained!

$908.25 per/mth P&i / O.A.C.

stOney Creek $399,9006 Lakegate Drive

WATERFRONT COMMUNITY. Next to Confederation Park andwaterfront trail, features new stylish kitchen with breakfast bar & SSappliances, gorgeous hardwood flrs, fin. basement with bedroom andrec-room, new shingles 2011, oversized garage, fenced yard with largedeck. You must see this ranch style home across from the lake.

$1,514.01 per/mth P&i / O.A.C.

hAmiltOn eAst $219,9002588 King Street East

Renovated 1-1/2 Storey Home! Features bright eat-inkitchen, skylights thru-out, new fooring, beautifulbathrooms, spacious living spaces, lots of storage & yardbacking onto ravine. Plenty of parking & close to highway& shopping

832.53 per/mth P&i / O.A.C.

hAmiltOn mtn $199,900309 East 26th Street

Cute as a button! 2 bedroom & 1.5 bathrm w/large garage &lot (39.83’x108’) needs some updating. Roof stripped & re-shingled in (‘11), vinyl windows, bathrm (‘10), front porch(‘12).

$756.81 per/mth P&i / O.A.C.

hAmiltOn Ctr $239,900103 Garfield Avenue S

ATTENTION INVESTORS! Legal non-conforming 2family dwelling with potential for third unit in basement.Front & rear drive w/garage. Sold “as is, where is” Needskitchen & TLC, new main flr bath ’12, beautiful hardwd flrs,lots of character! Potential Galore! Priced for action.

$908.25 per/mth P&i / O.A.C.

hAmiltOn eAst $319,900159 Adeline Avenue

New!! Pick your finishes!! One of a kind 1300 sq.ft.bungalow with double car garage on large 45x107 ft. lot ina neighbourhood friendly East end locale! 3 bedrooms, 2bathrooms including an ensuite & walk-in closet, 9ft mainfloor ceilings & main floor laundry.

$1209.82 per/mth P&i / O.A.C.

brAntfOrd $329,9003 Hollinrake Avenue

GORGEOUS HOME, SHOWS 10+++. Empire built and loadsof upgrades, carpet only in two bedrooms, granite, fireplace,island in kitchen, mostly finished basement with 2 piece bath,excellent landscaping and fully fenced. Huge master w/ensuiteand walk-in closet. Ready to move in condition!

$1247.64 per/mth P&i / O.A.C.

stOney Creek $343,90014 Goldeye Drive

2 Storey, 4 Bedroom, 3.5 bathroom home in sought afterLakepointe Community. Don’t miss out on this top tobottom finished home. Open concept main floor, bedroomlevel laundry and room for the family to grow!

$1,300.58 per/mth P&i / O.A.C.

SOLD ANOTHER ONE

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MarketplaceMarketplace

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Across1 As a result (2,11)

8 Voluntary self-abasement (7)

9 Regal (anag) (5)

10,16 Disparagement ofsomething one can't haveoneself (4,6)

11 Adversary (8)

13 Voice box (6)

14 Releases (4,2)

17 Time-wasting (8)

19 Smoke duct (4)

21 Ancient city on the Nile (5)

22 Higher price — better quality(7)

24 Sky-high (informal) (13)

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3 Socially unacceptable (3-1)

4 Not liable (for) (6)

5 Release (8)

6 Brass neck (5)

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10 Best time of youth (5,4)

12 Natural response (8)

15 More moody (7)

16 See 10 across

18 Inferior — scowl (5)

20 Younger brother to Cain andAbel (4)

23 Raincoat (3)

CRoSSWoRD PuzzlE (Solution on Page 9)

The Solution

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8

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Fill in the grid above, so that

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can NOT be changed.

hAmiltOn Ctr $289,900673 King Street East

LOCATION LOCATION LOCATION! This incrediblymaintained 2200 sq.ft. corner property with commercialfrontage and 2 additional apartments features fantasticincome, close to Cathedral high school, new roof 4yrs new,14 ft ceilings, hardwood floors, full basement with newerwiring & parking space in the back.

$1,096.36 per/mth P&i / O.A.C.

WAterfOrd $399,9000 Mechanic St. West

Parcel located at the corner of Mechanic St. & Norfolk,close to shopping and recreation. Water and sewer at thestreet. OMB approved 25 townhomes and 5 detached homesbuilding site. Vendor willing to consider severing and sellingseparately detached home lots.

$1,512.37 per/mth P&i / O.A.C.

hAmiltOn mtn $975,000516-526 Concession Street

Become a part of Hamilton arts scene or modify this largespace for your own purpose! Total building size: 14,400sq.ft. 390 seat theatre with an additional 4 residential and 5commercial units. Projected cap rate of 9.6 % uniqueproperty. Do not go direct.

$3,687.31 per/mth P&i / O.A.C.

beAmsville $235,0004993 King Street

Prime location in downtown core. Storefront with largewindow, front & back entrances can suit 2 businesses or 1large one. Parking spaces in rear & municipal parking lot.New furnace & 2pc bath. 600 sq.ft. of business space withGC zoning, + 800 sq.ft. 2 bedroom apartment on upperlevel. Tenant pays hydro.

$888.74 per/mth P&i / O.A.C.

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June 17, 2013 Issue 73

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