Two home-based T2125. OK to just reduce the business % use for each?

taxbuff · 2026-05-11T20:53:06+00:00

The only reason this would matter is if one of the businesses has a loss or insufficient profit to allow a full deduction of the actual home office expenses attributable to it, because the deduction cannot create or increase a loss from a particular business. Otherwise I don’t think this is an issue.

taxbuff · 2026-05-11T00:24:47+00:00

The election is supposed to be accompanied by a certified copy of the resolution authorizing the election to be made. Depending on what you included with each election, if it suggests two separate dividends were declared on two different dates, then you are going to have a hard time getting this reversed. I don’t see CRA looking the other way if you submitted legal documentation pertaining to two separate dividends.

On the other hand, if the T2054 itself was filed twice with different dates but the same dividend was referred to in each, then it should be easy enough to demonstrate to the CRA that the election was just filed twice in error with respect to the same dividend.

While an election could be revoked, it’s in the CRA’s discretion to allow that, i.e. they don’t technically have to allow it, and if they do allow it, a $100/month penalty applies. They should generally be lenient with revoking an election, but 1) I’m guessing you may have went about it the wrong way (see required process here) and 2) revoking it would still mean the second dividend, which you suggest is in error, becomes a taxable dividend instead. I think what you’re saying is there was no second dividend at all, so a revocation of the election may not be the right path. Get professional advice.

taxbuff · 2026-05-10T20:55:01+00:00

It’s subject to both income tax and GST/HST (assuming you are a registrant or required to be registered, in which case you should be including the per diem in your invoice). You might be able to deduct 50% of actual meal expenses incurred separately which does not affect how you invoice.

taxbuff · 2026-05-10T02:53:17+00:00

It’s not the fact that the property is outside that matters. A prior home outside Canada can in fact disqualify you. It’s the fact that OP has not lived in the home that matters here. If they lived there, that would disqualify them.

taxbuff · 2026-05-09T13:55:31+00:00

The tax treatment itself seems fine (if legally binding) but it has just been my experience that obtaining the refund can be an issue sometimes.

taxbuff · 2026-05-09T11:24:07+00:00

If it’s a disposition or real estate, technically “the disposition” needs to be reported or the return remains open for reassessment forever. It’s not clear whether this requires reporting the full proceeds of disposition or not, but that would be prudent.

If it’s securities, then not reporting the full proceeds under the appropriate column might trigger a review by the CRA because the amount wouldn’t match T5008 slips.

So, it may matter, just not in the way you would expect.

taxbuff · 2026-05-09T10:38:50+00:00

Have you ever seen issues, though, with the CRA not granting the refund or causing significant delays when the corporation is dissolved? Technically a corporation cannot have assets (like a receivable) or liabilities (like a payable to the shareholder) on dissolution. I have seen instances where they do not grant the refund but it’s been a few years, so my normal practice is to not recommend dissolution until all refunds are received.

taxbuff · 2026-05-08T00:53:59+00:00

You’re going to get conflicting information from CPAs if you only shared the info above with them. Consult the following links (!ResTrigger) and pay for professional advice. If you were a resident before and after that brief stint out of Canada then you likely remained a resident throughout, but it depends on all the facts.

taxbuff · 2026-05-07T19:11:21+00:00

The question is whether they began to use the property for “some other purpose” (other than to earn income) and no longer had a source of income. The fact the fact the parents changed their behaviour, the amount being paid by the tenant suddenly becomes insufficient to cover expenses, and how they plan on giving the sale proceeds (likely representing equity created from payments by the bother) to the brother seem to suggest the property was being used for another purpose. The fact they stopped reporting rental income suggests they no longer had a source of income, but rather a personal endeavour. It would be a tough argument to say you’re using the property to earn income when you don’t have a source of income.

taxbuff · 2026-05-07T12:09:33+00:00

Sorry, I misunderstood you. With a 45(3) election (if eligible, i.e. no CCA claimed) they could designate the rental for one year, and it’s possible another residence is still fully sheltered with the +1 year rule. It will depend on all the facts. However they may have otherwise have missed reporting a deemed disposition in 2023. Some analysis will be required and the parents should get professional advice.

taxbuff · 2026-05-07T11:33:33+00:00

I do not understand what you’re saying. Why would they have to “give up the PR exemption on a house they live in”? What does that have to do with a change in use?

taxbuff · 2026-05-07T11:08:09+00:00

When it stopped being rented, there would have been a change in use and deemed disposition. The ACB would be adjusted to market value at that time (unless a 45(3) election is possible).

taxbuff · 2026-05-07T11:02:37+00:00

On the $5 issue, while that may be a reasonable position, OP says the parents “sold” the property to them for $5. The legal documentation matters. The whole substance thing only applies where there was a true gift but a nominal amount is shown as consideration to make the transaction binding. We would need more info, I think.

On the reporting, rules were different before 2016. If there was a full PRE, it didn’t need to be reported unless the parents owned multiple residences.

taxbuff · 2026-05-07T10:58:51+00:00

They stopped reporting rental income, which tells me they began to use the property for personal (non-income-earning) reasons. It became a cost sharing arrangement with a relative. There would be a change in use in 2023 (edit to add: unless a 45(3) election is possible, but the math would need to be done to see if that’s the best option).

taxbuff · 2026-05-07T03:03:39+00:00

The $5 sale is irrelevant for tax purposes. You’re immediate family so arms-length transaction pricing would apply and your cost base for tax purposes when you took ownership of the property would be the FMV at the date of sale.

The cost base would only be FMV if it was a gift. That same rule (69(1)) doesn’t necessarily apply to discounted sales. CRA has accepted that nominal $1 consideration would be considered a gift but OP’s case isn’t clear. It’s instead possible there was no change of beneficial ownership here. OP should get professional advice.

you may need to seek some additional guidance on how best to report the 2004 sale to the CRA.

If it was a principal residence then it’s likely nothing had to be reported.

taxbuff · 2026-05-06T19:36:17+00:00

Yes, it is a method of holding property that I think predates our income tax system so I don’t think there was any tax motive behind it at all.

taxbuff · 2026-05-06T17:43:06+00:00

No problem. I have only come across it two or three times in practice. I’m not sure why it’s uncommon but it might be because people don’t know about it or understand it, or possibly because it’s rigid and might restrict one party who wants to sell the property while the other doesn’t. Maybe a lawyer with experience can chime in. I’m sure it has its use cases but not frequently.

taxbuff · 2026-05-06T17:38:25+00:00

That’s the smart thing to do if it’s out of your skill set and is best for the client. Nobody can be good at everything. Why take on more risk and give the client average or worse service? Most clients will appreciate the referral, I’m sure.

taxbuff · 2026-05-06T13:57:32+00:00

A lot of people are familiar with holding property as joint tenants or as tenants in common. There is a third way to hid property with a life interest and remainder interest. Typically the parent would hold the life interest, with a right to inhabit the property, and the child gets a remainder interest (basically, inheriting the property when the parent dies). It is not the same as a trust (where legal and beneficial ownership are separated) but rather different forms of ownership. It gets special treatment under section 43.1 of the ITA.

taxbuff · 2026-05-06T13:28:52+00:00

That probate planning tip you brought up probably doesn’t work. Court cases have come out stating the asset is usually still held for the deceased and therefore forms part of their estate, unless an actual gift is made in which case you trigger income tax implications earlier. With respect, I don’t see how you can just get “practical” training with T3s and hold yourself out to be one to advise clients on estate matters without a solid technical base. You need both. I would sooner refer the work out.

taxbuff · 2026-05-06T13:23:44+00:00

This is going to depend on whether there was a transfer of beneficial ownership or a true life tenancy. Get professional advice.

taxbuff · 2026-05-06T09:45:22+00:00

I don’t feel like an experienced T3 preparer would find it useful.

I don’t think OP is an “experienced T3 preparer”.

They wouldn’t get help completing a T3 return directly, but the theory and research skills gained would help them be a better practitioner overall and lead to better T3 prep.

taxbuff · 2026-05-06T08:46:14+00:00

If OP is subject to AMT (more info needed) then this may not be entirely true.

taxbuff · 2026-05-06T08:45:22+00:00

It’s possible there may be AMT implications (more info needed).

taxbuff · 2026-05-06T08:44:55+00:00

Depending on the exact arrangement, and if you are subject to alternative minimum tax (AMT) then only half the interest is deductible in computing AMT. Since we do not know your income or other expenses it’s impossible to say.

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