October 1 seems to be the day that Ontario Realtors can setup a Personal Real Estate Corporation (PREC) to own their business. The reality is that the legislation has not been announced. We’re still waiting.
But this does not mean that you cannot do some prep work to get ready.
In this video, I went through the PROPER STEPS required to setup a PREC to own your realtor business.
Unfortunately, it isn’t as simple as opening a corporation, diverting all income to the corporation, shut down the sole proprietorship and then you pay 12.5% and live happily ever after.
If you don’t take careful steps, CRA can put a value on your business, deem to have you selling your practice from your personal name to the corporation, and impose tax on gain on sale of business personal tax.
If they say your business is valued at $100K, and assuming you didn’t file the proper forms to defer the gain, this $100K can be added to your return and taxed accordingly.
The key is to do an analysis, determine if there is value, file the proper form and you can stay on the right side of the Income Tax Act.
Feel free to reach out to our office to setup an appointment to go through your situation and see if PREC is for you before you dive too deep in. 😊
Until next time, happy Canadian Real Estate Investing.
Cherry Chan, CPA, CA
Your Real Estate Accountant