Toronto Income Real Estate And Claiming Business Losses
Thanksgiving weekend is the unofficial closing of cottage country season for Greater Toronto Area vacation real estate owners. The leaf colour changes have reached their peak, and soon the temperature will drop too low to be palatable during the majority of evenings on the lake.
Changing colours just north of the Greater Toronto Area.
Those summer nights around the campfire and fishing opportunities are the reason many people choose to own vacation properties and cottages. However now that it’s fall, your own family may not see the cottage again until late next spring.
If the property is winterized, meaning warm, secure and generally livable during the winter, it can be rented out year-round when your family isn’t using it to generate extra income and help pay off the mortgage, making these secondary homes a lot more worthwhile for some homeowners. If the cottage is near snowmobile trails, ski hills and other winter hotspots, it will likely be a popular choice for people looking for a place to rent for a weekend here and there throughout the winter months.
If you purchase a vacation home and eventually decide to rent it out with less-than-stellar results, you may run into some problems when trying to claim business losses. A recent case that has come through the Canadian court system has identified this problem along with the costs involved.
A man in Winnipeg purchased a vacation home in 2004 and intended to rent it to friends and family, as well as to members of the general public that would be garnered through mild advertising efforts – like newspaper ads and posters. The rate the man set for one week at his cottage was extremely high when compared with other nearby rental properties.
The next year, the cottage was not rented at all, and it was only rented for three weeks combined during 2006 and 2007. He claimed business losses amounting to over $15,000 for 2005 and 2006, but these losses were denied by a judge because the man did not have a proper business model set up, was charging obscene rates and did not appear to purchase the cottage with the strict intention to make a profit.
If you are planning on using your cottage for your own family and only intend on renting it out once in a while, or plan on a trial run with regards to renting it out this winter, you may not be able to claim business losses when it comes time to do taxes.
Toronto Income Real Estate And Claiming Business Losses is a post from: Toronto Real Estate Updates