The Secret of Making this Christmas the Best Ever and How to Effectively Donate Real Estate to Minimize Taxes

Erwin and I, together with a few friends, started the Hamilton Basket Brigade merely a year ago. We started from feeding 37 families last Christmas. We are feeding 200 families this coming Saturday.

IMG-20151211-WA0002When the words spread out, we even got shoe donations from a shoe manufacturer. Over 200 pairs of shoes were donated so far. We have distributed all of them to local kids who are in need.

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We are still in the process of becoming a charitable organization. Erwin and I talked about committing a fixed amount of money to this charity so we don’t always have to raise funds for each event.


[private levels=”myrealestatetaxtips”]Instead, we would use the funds donated as the foundation and earned sufficient amount of investment income to use for each event.

If we invest in a second mortgage product, we can get 10% interest income.

Putting it into perspective, feeding 200 families 3 times a year would require income of $48,000. This is equivalent to $480,000 of contribution.

We won’t get to this number immediately but we gotta start somewhere!

“Can we afford this?” Erwin asked me this every now and then.

As I am finishing off with the book “Winners Never Cheat” by Jon Huntsman, a self-made billionaire, who would borrow money to donate, I learned that we would always be able to afford to make a donation.

He had donated $1.2billion as of 2011 according to this Forbes article.

IMG_20151130_145107He couldn’t afford to go to college. With his exceptional high school marks, he was offered a scholarship to go to Wharton School of University of Pennsylvania. Even with the scholarship, he still couldn’t afford to go. The family who offered the scholarship made a special arrangement to cover all his tuition, room and board. The only request by this generous family was that one day he would pay it forward.

And sure enough, he did, through both good and bad times.

It is inspiring.

Most of us, as real estate investors, are not billionaires. We chose to take care of ourselves. We chose to be responsible for our financial future.

The mortgage broker we have been working with recently had a mandate to donate half of his net cash flow to charities and he’s committed to donate a percentage of his income to charities.

“The secret of living is giving.” ~ Tony Robbins

If you are thinking about donating eventually, here is some good news from the CRA to encourage donation.

Starting from 2016 onwards, if your estate sells a rental property and donate the proceeds to a qualified charitable organization, you’re exempted from paying taxes on the capital gain of this property on the terminal return.

Say a real estate investor in his mid thirties purchased a property for $300,000. When he passed away, the property was worth $1million.

He would have to pay taxes on capital gain he’s made at his terminal tax return for $700K.

But if he chose to make a donation on the full proceeds from the sale of this property, he would not need to pay tax on this $700K, equivalent to $175,000 tax liability.

On top of that, he would also get a tax credit on the full donation of $1million. He would be eligible to use the tax credit to offset against all his tax liability.

The government has done their part to encourage us to help. What are you going to do to help those in need?

If you have no set plans yet, come join us this Saturday. We still need some drivers and packers to distribute the dinners.   Please email maria@mrhamilton.ca for more information. [/private]


Until next time, happy real estate investing.

Cherry Chan, CPA, CA

Your Real Estate Accountant

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation.
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