COLCO FAQs

 ----- Original Message -----
 From: "Dan ????????"
 To: <david@centa.com>
 Sent: Thursday, February 01, 2001 8:07 PM
 Subject: HELP!
 

> Dear David,
>
> I watch your TV show regularly, it's great!
>
> I am somewhat familiar with the tax deductibility of repairs on a rental leaky condo 
> against current income, but I wish to learn as much as
> possible about the various scenarios, CCRA rulings, what constitutes
> current income, etc.
>
> In particular, I recently bought a unit with the full intent of renting
> it out, but prior to that I lived in it for a period so that I could
> facilitate major upgrading and renovations.  It was during that time
> that it was discovered that the building was a leaky condo.  Does my
> intention to rent at the time of purchase provide me with grounds to
> deduct repairs?

 There is no "for sure" answer to this question but I wil try.

 1.    Any major upgrading and renovations that you made before renting
     are NEVER deductible against current income.  They are added to the
     building cost and are depreciable at 4% per year but only up to the amount
   of profit from the   rental income.

 2.    If an already rented condo "suddenly" needs unexpected repairs
        because of water damage the repairs should be deductible and 
        can be used to create a loss.  This loss which would show up on
        line 126 of  the tax return would be deductible against other income 
        from wages, business, interest, dividends, royalties, etc.

 3.   IF  and I say IF, the paperwork showed your intention to rent and
       you are only talking a couple of months between "buying", moving in to
       renovate, and then advertising it for rent when you find out it is leaking, you
       could certainly have an argument that it was and unexpected item and should be a
       repair.

  However, if you bought it and spent a year renovating and "then" discovered the
  need for  leaky rotten condo repairs, it would not be a repair.  Anything more than
  90 days for the renovations (in my opinion) is too long a time between the
  purchase and intenet to rent.

 I am not the judge, and other circumstances might have slowed down your
 rental plans.  I can almost guarantee that you would be audited and would
 likely have to go to court and would have a tough time with 2 but win and
 would be unlikely to win in 3 above.

 > Also, the renovations are almost finished but the unit may not be
 > rentable, because no tenants as of yet, wish to rent it given what they
 > will have to go through when the building envelope reconstruction
 > starts.

 This extra statement implies more than 90 days already.  I think you are
 faced with adding your repairs into the Adjusted Cost Base of the unit.

 > Can you help me?  I have great need for this information but am
 > understandably very low on funds.

 You got a free answer.  Hope it helps

David Ingram