Why Canada Needs Capital Gains Tax Deferrals on Real Estate

May 6, 2008 · Filed Under Real Estate Articles and St. John's Investments 

Canadians are increasingly migrating to regions where new jobs are plentiful, and they must be able to move their assets with them. Households can move their furniture and their stocks and bonds, but not their real estate investments, without substantial tax consequences. Reinvestment in real property should be facilitated so that investors can reposition existing investments without punitive tax measures. The deferral will facilitate more effective management of real estate investment portfolios in recognition of the fact that Canadians are becoming more financially self-reliant in retirement.

The Canadian Real Estate Association (CREA) is recommending to the federal government to amend the Income Tax Act to promote increased reinvestment in real property. The amendment would effect a deferral of both the capital gains tax and the capital cost allowance recovery for all real property investments when an investment property is sold and the proceeds are invested in another real property within the subsequent year. Any proceeds that are eligible but not reinvested, or where such reinvestment does not meet the criteria, would be subject to capital gains tax. (Similar to the United States 1031 Exchange)

The proposal also helps make the federal government an active participant in the regeneration and intensification of urban neighborhoods. This requires properties to be turned over at a rate that is sufficient to promote regeneration.

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Comments

3 Responses to “Why Canada Needs Capital Gains Tax Deferrals on Real Estate”

  1. Alex Gierus on May 6th, 2008 4:38 pm

    I agree with this proposal. Where can I find more information on it (your CREA link just goes to the general website)?

    Alex

  2. Stephen Winters on May 11th, 2008 12:47 pm

    Hey Alex,

    The link to the PDF file “Reinvestment in Real Property” can be found at http://www.crea.ca/public/news_stats/pdfs/capitalgainsjan31.pdf

    This could be fantastic new if this proposal is ever put into action.

    Cheers,

    Steve

  3. Igor on March 1st, 2010 2:53 pm

    Any news on getting somthing like 1031 Exchange in Canada?? Is there any other way to shelter capital gains on selling a property if it’s invested in something else?

    Igor.

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