I just sold a rental property that was held within a corporation. What are the tax implications?
Allan Madan, CA
When rental property is held within a corporation, the capital gains rules are slightly different. Similar to an individual holding a property, only 50% of the capital gain is taxable. The taxable portion of the capital gain is taxed at a corporate tax rate of approximately 46%. When dividends are paid by the corporation to its shareholders, a portion of the corporate tax paid on the capital gain is refunded from the RDTOH account at a rate of $1 for every $3 of dividends paid (i.e. 33%).
The remaining tax free portion (i.e. 50%) of the capital gain is added to the capital dividend account (CDA) account. Dividends paid by the corporation to its shareholders from the CDA account are tax-free.
Disclaimer
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.
ABOUT THE AUTHOR
ALLAN MADAN
CA.CPA.CGA
Allan Madan is a CPA, CA and the founder of Madan Chartered Accountant Professional Corporation. Allan provides valuable tax planning, accounting and income tax preparation services in the Greater Toronto Area.
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