Testimonials

Cathy Mauro

"In the startup phase of my business I needed some challenging questions answered relating to payroll and accounting systems. Rather than spending hours researching it, I let Williamson Accounting handle it – providing clear-cut answers to my issues instantly. As a small start-up I was unsure a professional accounting firm would take time to work with me. But no business is too small for Williamson Accounting and they gave me the one-on-one consultation I needed and great professional guidance. With their help I know I am making smart decisions in handling my business finances."

Cathy Mauro, President, Stand Ease Incorporated

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Williamson Accounting Inc. helping your small business to reduce taxes and simplify accounting in the Greater Toronto Area (GTA) and across Canada.

For a free initial conversation about your business, call (416) 444-8747 or Contact us.

Tax Implications of Owning a Cottage or Second Home

principalresidenceCottage ownership is enjoyed by many. Having a place away from home, where you can experience the great outdoors with family and friends is golden. Other people prefer a change in scenery and would rather have the flexibility of going to different places rather than be compel to one given location. I guess different strokes for different folks.

If you own a cottage or second home and are now seeking to sell, a few things will come to mind- mainly the tax implications of ownership.

A cottage, or second home, is considered a personal-use property, if it is used primarily for the personal use by yourself, family member or beneficiaries of a trust.

Where things get a little bit complex is when calculating the capital gain upon sale.

There is no deemed disposition(sale) if a person moves into their cottage, so no tax will be payable as a result of this move. However, if the use of the property changes from personal use to being used for the purpose of gaining or producing income, such as a rental property, there is a deemed disposition.

When a cottage is sold, tax is payable on any capital gain, less any principal residence exemption. If there is a capital loss, the loss is not deductible, because losses on personal-use property are not deductible except for listed Property losses, (ie. Loss on the sale of gold coin, etc.) which can be deducted against listed property gains.

It is important to keep a record of the adjusted cost base of both the primary home and the cottage, to be used to calculate the gain on sale. If the cottage has been owned since before 1972, only the increase since December 31, 1971 is taxable.

Supporting information can be found at the following CRA resources:
-Capital gains, which includes information on personal-use property
-Losses, their deductibility in the loss year or other years

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Quotable

Michelangelo

"The greatest danger for most of us is not that our aim is too high and we miss it, but that it is too low and we reach it."

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