Bare trusts are often used in financing transactions. Real estate investors prefer to purchase properties in the name of their corporation for tax reasons. Therefore, consider using a bare trust if your bank won’t loan money to your corporation, but is willing to provide you with a personal mortgage for the purchase of an investment property.
For tax purposes, having a bare trust means that the corporation is the owner of the property, while you are on title to the property. The income earned from the property (and capital gains on the eventual sale) will be taxed by the corporation.
Expenses will also be paid and deducted by the corporation. Unfortunately, a bare trust will not provide you with limited liability protection. Therefore, you should purchase liability insurance to protect yourself.
The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.