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Sting from Sale of Rental Properties |
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Tuesday, 21 November 2006 |
Lobbying attempts to reduce the sting on the sale of existing rental properties
Smaller landlords might be inclined to build new rental apartments if they didn’t face an immediate tax hit on the sale of existing properties, the Canadian Real Estate Association argued Monday.
The association joined the chorus of business groups calling on federal Finance Minister Jim Flaherty to make good on the Conservative government’s promise to reduce the sting of Canada’s capital gains tax.
Flaherty has already said his department is considering eliminating the capital gains tax for individuals when they sell investments, so long as they reinvest those gains within six months.
The real estate association is asking that Flaherty scrap its definition of “active” versus “passive” investor so that landlords with smaller holdings and fewer employees can defer capital-gains and capital-costallowance taxes, as long as they buy or build other properties within a year.
It is the same tax break larger companies get when they sell buildings and acquire “replacement properties.”
The association said the tax hit on selling an apartment block can be large. It used the example of $115,000 on a building sold for $650,000 in the research paper it submitted to Flaherty’s office.
“Investors are sitting on investments [in rental housing] because the tax consequences of selling [properties] are prohibitive,” James Brennan, a real estate association director, said in an interview. “Investors aren’t selling and government isn’t collecting capital gains.”
Cameron Muir, the new chief economist for the B.C. Real Estate Association, said the tax issue is one of the reasons why Vancouver’s rental housing stock has stayed stagnant at about 106,000 units.
(prepared by Derrick Penner/Vancouver Sun)
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