Eric Tiftikci - Blog

Top 8 Things to Consider Before Building Your Own Deck

eric.tiftikci@century21.ca — Fri, 17 May 2013 00:00:00 GMT

Summer is coming! Time for BBQ and soaking under the sun! More and more people are thinking of having their own deck and enjoying more outdoor activities at their places. If you are going to build your own deck, here are the tips from Paul Lafrance, HGTV.

Top 8 Things to Consider Before Building Your Own Deck
By Paul Lafrance

Spring is in the air and with it, a noticeable spring in your step, as this is the year that you plan on finally taking on what is considered (in some circles) to be a Canadian rite of passage…Building your own deck! I say GO FOR IT! Before you rush off to the nearest big box store to buy a whack of lumber though, consider these very important factors so you can avoid making some very classic decking mistakes:

1.Consider a professional design - Whether you are building your deck yourself, or having it professionally built, do not undervalue the importance of a design that will add a “wow” factor to your project. I design for people all over North America.

2.Understanding the sun – The sun can be a beast, so if you burn easily like me, make sure you incorporate an element of shade into your design.

3.The BBQ – The barbeque is typically the worst placed item on a deck. Remember, the gas line needs to run to the ideal BBQ location, not the other way around.

4.Consider Furniture First! – How often do you get the chance to go furniture shopping, and then build the room to match the furniture? There is an amazing selection of exterior furnishings these days. Choose the size and shape you like, then design “rooms” on the deck to incorporate it.

5.Use Footings – Even if you are building a deck that does not require a permit, it is important to use 48” deep concrete footings that extend below the frost line. Always use a builders tube to keep frost from being able to heave the footing.

6.Floating Deck Mistakes – A floating deck means that the structure of the deck does not connect to the house structure. This typically requires a line of footings close to the foundation wall for a support beam. Here’s the problem; footings are meant to sit on “undisturbed soil” which is compacted and will support the footing without sinking. When digging a footing 12” to 24” away from the foundation, the soil in that area is “disturbed soil” due to the excavation required to build the house. These footings must be enlarged, particularly at the base to avoid sinking.

7.Do your Structure Homework – Again, if your deck does not require a permit, you still need to build it properly. It is easy to find online help in order to understand basic fundamentals like footing size and spacing, beam sizing, joist sizing and spacing, railing guidelines, and proper staircase construction.

8. Decking Patterns – One of the easiest ways to spice up your deck is to have some fun with the decking. I personally hate the traditional method of fastening down a deck board, and if it doesn’t reach the end of the deck, just adding an extra piece on. After a few winters of expansion and contraction that “seam” between the boards looks terrible. Simply adding a “spine” in the deck creates an intentional seam, which looks great for years to come.

If you are interested in renovating, buying or selling your homes, please contact Eric Tiftikci.
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By An H

Can you avoid capital gains tax?

eric.tiftikci@century21.ca — Thu, 16 May 2013 00:00:00 GMT

How to calculate the capital gains tax when the sale of the property is a little bit complicated than selling your principal home? take a look at the article from MoneySense.

Can you avoid capital gains tax?

Your home can be an effective tax shelter, but other forms of real estate can attract capital gains taxes. Here’s what you need to know about some of the more nuanced real estate scenarios.

By Romana-King-Blog

When you buy real estate you expect that, over time, it will appreciate in value. If you sell that property for more than you paid, you will have an appreciable gain in value and this triggers a taxable capital gain for the Canada Revenue Agency (CRA).

According to my accountant, this isn’t necessarily a problem. His rationale: If you owe tax it means you’ve made money. And capital gains are taxed at only half your marginal tax rate—one of the more favourable tax treatments offered by the CRA.

The real quandary, for most readers, is how to calculate this capital gains tax when the sale of the property is a tad more complicated than selling your principal home.

For that reason, I address some of the more interesting questions readers have sent regarding the sale of property and how to calculate the taxes owed on their capital gains.

(For more on the basics of the principal residence exemption and how the sale of property doesn’t always produce a capital gain see my Home Owner column in the June 2013 issue of MoneySense on newsstands May 13.)

Claiming investment expenses

Recently a reader, who had bought and rented out a condo as an investment, asked if he could claim the condo’s special assessment bill as an expense against the potential capital gains tax he’d owe once he sold the condo.

“He’s mixing apples with oranges,” says Albert Luk, lawyer with Devry Frank LLP, a Toronto-based law firm. You can’t claim business expenses against a capital gain—you can only claim deductions against business income (or annual expenses against annual rental income). If you want to reduce your capital gain you need a capital loss—such as selling stock that dropped in value.

Every investor has to make a decision, says Luk, either claim expenses and report the sale as income, or eat the expenses and sell the property as an investment, enabling it to qualify for the preferential capital gains tax treatment.

I won a home!

For the fortunate few, lottery wins are not taxable. That’s great news for one reader who wrote in asking how to calculate the capital gains tax on the sale of a home they won in a regional lottery.

“If you don’t already own a principal residence, the home can be sheltered from taxable gains through the principal residence exemption,” explains Scott Plaskett, president of IRONSHIELD Financial Planning, a fee-only firm in Toronto’s west-end.

If you already own a home, and decide to sell your winnings, the CRA will calculate your capital gains based on the difference in current market value of when you won the home versus when you sold the home. The longer you wait, the greater chance you’ll owe capital gains tax.

“I had a client who won a home in the Princess Margaret lottery,” says Plaskett. The client already had a principal residence and, though appreciative, wanted to sell the winning home quickly. The client sold and paid no tax, as the capital gain was almost nil from when he won to when he sold. “He was just tired of cutting the lawn.”

Renting out your basement

Many readers want to know if their home will continue to qualify for the principal residence exemption if they rent out a portion of their house. Their concern is prompted by stories of people who lost this exemption after years of renting out their basement.

While it’s true—you can lose your principal residence exemption—it really only happens if you rent out more than 50% of your home, or when you decide to claim capital cost allowance on the portion of your home that is the rental.

The CRA recognizes that, over time, depreciable property will become obsolete. Believe it or not, this also applies to real estate. Because of this you are well within your right to offset this loss in value by deducting the depreciation over a period of several years. This deduction is the capital cost allowance (CCA). However, if you claim CCA on your home, you are effectively telling the taxman that this property is used to produce income, and you use lose the opportunity to claim a capital gain, which is taxed much more favourably than income.

But what if you buy a duplex or fourplex and live in one unit while renting out the others? Can you deduct costs, including CCA, to offset the rental income you collect each year and still claim a principal residence exemption? Yes: but you’ll need to clearly document what portion is for personal use and what portion is rental. Only deduct expenses for the rental portion. When you sell, you can claim the principal residence exemption for the portion that was for personal use. To understand how this all works, consider the following:

- Buy a duplex for $400,000.
- Rent out one unit (for $1,500 per month) and live in another.
- Each year you report your annual rental income (about $18,000) and then offset these earnings with expenses associated with the unit. Remember: you cannot deduct expenses, including CCA, for the personal portion of the duplex.
- After four years you sell the duplex for $500,000.
- Because 50% of the property is used for personal use, you can shelter 50% of the $100,000 capital gain.

But be forewarned: CRA is cracking down on income generated from real estate, and in order to qualify for the principal residence exemption no more than 50% of a principal home can be used for rental purposes. For people thinking of buying and investing homes with a personal use portion you may want to seek out professional advice.

Gifting property (and avoiding probate)

In Canada, you can give gifts to loved ones without tax implications (at least for the recipient). However, this doesn’t mean you can completely avoid taxes when you gift money, stocks, shares or property. “There are tax implications on gifted property as the CRA sees this as a transfer of ownership, which is a deemed disposition,” explains Plaskett.

Still, many parents consider gifting property either upon death or before (by adding adult children to the title) as a great way to transfer property and avoid probate and other taxes.

“Because Canada doesn’t have a gift tax, like the U.S., people often get caught in tax traps when they start gifting without knowing the implications,” explains Luk.

If a parent gifts an adult-child real estate, the CRA considers this transfer of ownership as a disposition: a virtual sale of the property at fair market value. As a result the parent will owe taxes on any appreciable gain on the property (from when they bought the property to when they gifted the property). The parent can avoid these taxes if the gifted property qualifies for the principal residence exemption.

However, the adult-child will have to pay capital gains tax on the property should they decide to sell (and if they already own their own principal residence). The quicker one sells, however, the lower the chances of a capital gain, and the lower the chances of taxes owed. That’s because the capital gain is only calculated from the point of inheritance to the point of disposition. Add your adult-child to title years before you die and you’ll simply be increasing the potential for a capital gain and for taxes owed on that gain.

“It gets even more complicated if you gift property to a spouse or a related minor child,” says Luk, where the gifter may be hit with “an unexpected tax consequence known as the attribution rule.” This is when income, dividends and capital gains are attributed back to the gifter. “The take-away is that not all gifts can be given tax-free, even if there is no gift tax, per se.”

Sever land

Another option some readers have considered is to sever their land and to build two houses—keeping one home as their primary residence and gifting the other house to either a family member or the builder.

“This is a tricky timing issue,” says Plaskett. Anytime there is a change of use in a property the CRA considers this a deemed disposition. If the land originally housed their principal residence, then the gifters are sheltered from capital gains tax. However, the recipient—whether it’s a family member or the builder—would be subject to capital gains taxes if they built and then sold the additional home. That means if a builder built the two homes for $1.1 million, and then took possession of one and sold it for $750,000, the builder would owe tax on the $200,000 capital gain. Worse: because of the builder’s profession, this gain could actually be considered business income by the CRA, which eliminates the capital gain tax treatment on the sale of the house and forces the builder to pay his full marginal rate on the $200,000 profit.

If, however, the recipient chose to keep and inhabit the home as their primary residence, this would “make it a tax-free transaction,” says Plaskett.

Anyone interested in pursuing this type of gift should talk to a professional, as the CRA may have different rules depending on whether you sever the land before or after you build the two homes.

One building, two uses (business and residential units)

Those interested in diversifying their type of real property holdings may have considered (or already bought) a mixed residential/commercial unit. But when it comes time to sell there can be some confusion on how the capital gains tax will be applied.

“Whenever you have a mixed usage property you want to keep meticulous records,” says Plaskett. “Particularly regarding the value of the building or each unit during times of usage change.”

This will require owner to pay for an assessment or ask a realtor to provide a market comparison analysis and an evaluation of the fair market value of the building at each stage, says Plaskett.

By valuing each unit during each phase of use, you can determine your adjusted cost base (ACB)—a tax term that refers to the change in an asset’s book value.

For example, say you buy a home for $250,000 and live in it for five years before deciding to buy a larger property and keeping your initial home as a rental property.

Since you’ve changed the use of the initial house you are subject to capital gains taxes, but since it was your primary residence you can claim the exemption. This won’t work, though, when you go to sell this property a few years later. The good news: You can reduce the taxes owed by determining your ACB for the property.

By obtaining a valuation of the property at the time it stopped being your primary residence, you can shelter those capital gains from future tax repercussions. Here’s how it works:
- Buy a home for $250,000 and live in it for five years.
- Transition the home from residence to rental property.
- At that time, obtain a fair market value report (either from an appraiser or a Realtor) that values your home at $350,000.
- Sell the rental property three years later for $400,000.
- You will only owe tax only on $50,000, as the additional $100,000 gain is sheltered using the principal residence exemption.

Now, it doesn’t matter if the property is separated into different residential units, or commercial and residential units, the same principles apply.

Be forewarned: the ACB calculation can get a bit tricky. For instance:
- You buy a duplex for $750,000.
- You move into one unit and rent out the other.
- A few years later you move out of your unit and rent it out.
- At that time you obtain a fair market value report from a Realtor, which states that the property is currently worth $1 million.
- A year later you sell the duplex for $1.1 million.

In this example, only the $600,000 gain would be taxable at half your marginal rate, says Plaskett, as the principal residence portion of the building would be exempt.

Whether or not you made money can get even trickier if your ACB is lower than the current market value of the asset. “Always ask yourself: what did you take out of your jeans to invest,” says Plaskett. “And don’t forget: Anything you receive—whether it’s interest, rental income, or dividend—is part of your investment return.”

Tenants in common

When a married or common-law couple owns a home together the ownership is known as joint tenancy. This allows for the automatic transfer of the property to a surviving spouse without penalty or prior paperwork. (As with anything, this arrangement gets more complicated when you have a mixed or blended family.)

Yet, when adult children inherit a property they become tenants in common. This type of ownership allows two or more people to have equal ownership interests in a property. Unlike joint tenants, however, each can choose the beneficiary that inherits their portion of the property, should they die. Where appropriate, tenants in common may also choose to sell their portion of the property, without consent from the other owners. And tenants in common ownership is not limited to people who inherit property. Many investors also opt for this type of ownership when there are two or more investors in one property.

When it comes to calculating tax, though, each tenant in common is on their own. “Everyone has their own adjusted cost base,” says Plaskett.

For instance, if two adult children inherit a property with a fair market value of $1 million and then rent it out, their adjusted cost base would be $500,000 each. A year later, investor A sells his portion of the property to investor B for $750,000. When investor B sells the property for $2 million, she will only pay half her marginal tax rate on $750,000 of the profit, because her ACB is $1.25 million ($500,000 plus $750,000).

Inheriting international property

In Canada you’re required to report your worldwide income and assets. Any profit earned on the sale of the foreign property is calculated in the same manner as non-primary residence property sold in Canada.

“Even if you own or inherit a home in Florida that doesn’t mean you avoid taxes,” says Plaskett. But there are ways to avoid taxes on foreign property. “If you put the property into a trust, so you don’t personally own the property, then you don’t have to worry about the capital gains once you sell the property,” explains Plaskett. The trust will pay U.S. tax, but will be exempt from Canadian taxation. Get expert help if you’re thinking of setting up a trust, however, as tax treaties and legal methods of minimizing tax can get complicated.

Getting hitched

You’ve fallen in love and you want to move in together, but you both own your own homes, what should you do to minimize taxes?

“There are several options for a couple where each person owns their own principal residence but they want to move in together,” says Albert Luk, lawyers with Devry Frank LLP, a Toronto-based law firm.

The first option is to sell one of the homes. This person could claim the principal residence exemption and avoid paying capital gains taxes. But to qualify for a principal residence exemption you will have to sell the home before getting married (or moving in together). Under tax laws a family unit can designate only one property as their primary residence—and a family unit includes spouses and all dependent children.

The second option is to convert one home into an income producing property by renting it out. You will trigger capital gains taxes but only from the time you started renting out the property to the time you actually dispose of the property. That’s because the CRA considers the change in the use of the property as a deemed disposition—tax talk for a change in use of a property is the equivalent as a sale at the current, fair market value.

If you opt to keep the second home as an income property you can minimize the taxes owed by keeping good records. “Get an appraisal or a property valuation just before you change the use of the property,” says Scott Plaskett, president of IRONSHIELD Financial Planning, a fee-only firm in Toronto’s west-end. That way when you go to sell the home, the capital gains tax will be calculated from the time the home became a rental property, not from when you first purchased the house.

Getting divorced

A few readers ask what the process is for calculating capital gains tax on a home that was part of divorce proceedings.

If the divorce is short and sweet—and both parties have vacated the home in order to quickly sell the property—then taxes would only be owed from the time the home stopped being a primary residence for the couple until the time the property sold.

The longer it takes to sell the property the greater the chance for potentially higher capital gains taxes being owed. (The assumption being that the property will appreciate over time.)

If, however, one half of the couple continues to live in the property and chooses to buy out the other half, there will be no capital gains tax owed as the home is still being used as a primary residence

By An H

A Mother's Day Living Room Makeover

eric.tiftikci@century21.ca — Mon, 06 May 2013 00:00:00 GMT

Mother's Day is coming! Have you have your gift ready yet? Or are you still looking for the best gift for your mom? Here is an idea from HGTV's Sabrina Soto. She shows you the simple steps to give your mom's living room a gorgeous and fresh feeling! A great gift for Mother's Day.

A Mother's Day Living Room Makeover

HGTV Magazine shows you how Sabrina Soto, host of the The High Low Project, livens up her mother's living room.
By Betsy Goldberg

It's not that Maria Elena Soto was unhappy with her living room-it's just that she never used it. "She liked the blue chairs and gray sofa, but she avoided the room because it was like an empty shell," says Maria's daughter, Sabrina, host of The High Low Project. "My mom is a decorator turned ‘professional grandma'-she helps out with my sister's four kids a lot-so I knew she wouldn't get around to doing much with the space. I was dying to get my hands on it!"

First up: a plush, patterned rug, which instantly changed the vibe from cold to inviting. Then Sabrina gave the room a little zing with graphic pillows, a quatrefoil-shaped mirror over the fireplace, and a gold-leaf coffee table.

"I love, love, love it!" says Maria of her daughter's handiwork. "I'm finally bringing friends into the living room instead of the TV room. And some nights I'll sit in here with my family and just admire the space." How's that for a happy Mother's Day?

Read on to see just how Sabrina transformed the space.

Photo by Victoria Peason

Chairs
Sabrina convinced her mom to get the velvet Room & Board chairs two years ago. "I told her, ‘They're not Elvis crazy blue-they're subtle.'" But the pair, on its own, felt stiff. Sabrina's fix: a light throw from Pine Cone Hill and a pillow from Layla Grayce. A hammered wood table with a silver finish sits in between.

Rug
Maria didn't think she needed a rug, but Sabrina knew better! This wool pile one from Rugs USA fills the area and still shows off the wood floor.

Mirror
"A mirror should take up at least two thirds of the space above the mantel," says Sabrina. She picked one from Z Gallerie and painted the frame White Fur by Behr.

Coffee Table
The small table Maria had wasn't so useful in the space. This gold leaf and glass one from Worlds Away is about 3 feet square, so it makes sense for company.

Sofa
The curved gray wool sofa from West Elm that was already in the room was definitely a keeper. All it needed was a bunch of throw pillows for personality.

Lamps
"Two identical lamps opposite two identical chairs makes a room look balanced," says Sabrina. These gilded iron lamps are from Circa Lighting.

By An H

Celebrate Spring With a Flower-School Party

eric.tiftikci@century21.ca — Mon, 06 May 2013 00:00:00 GMT

Spring is finally here!!! It's been a long waiting, I guess everyone has the same feeling. But this year's cherry blossom is definitely beautiful, much more beautiful than last year! so do the other flowers and plants. I guess it's the weather effect. And having some flowers or plants in your place can bring you an energetic feeling. Wether you would like to decoate your place with a more spring and fresh feeling; or you and your friends are thinking of gathering together to do some fun and productive activities. Here are the great ideas from Camille Styles, HGTV.

Celebrate Spring With a Flower-School Party
Gather a group of friends to learn expert tips for making beautiful floral arrangements in a fun environment. Perfect for a bridal shower or birthday gathering, this party is a true celebration of the season's abundant flowers and produce.

By Camille Styles; Photography by Paige Newton Photography

Set Up a "Flower Market"
The day before the party, head to your local flower market to pick out the best and brightest flowers the season has to offer. Be sure to get greens, fillers and flowers in an assortment of colors and sizes. Avoid yellow leaves and brown stems, and don't hesitate to ask a sales associate for help. On the day of the party, display your finds in market-style galvanized buckets, where guests can easily access the flowers they'll be using in their own arrangements.

Create a Seasonal Table
For lunch, cover the dining table in butcher paper and add a romantic runner made with floral fabric cut straight from the bolt. Place a few beautiful arrangements in the center of the table, along with small dishes full of seasonal sweets like peaches and cherries. After the meal, remove the runner to reveal a functional workspace for the "flower school" portion of the party.

Perfect Placement
The place setting is simple but beautiful: a china dinner plate, your favorite flatware and a folded napkin. Fabric flower pom pins are the perfect focal point, and once guests sit down they can wear their pins throughout the party then take them home.

Bon Appetit!
Create a fresh menu full of vibrant and seasonal snacks that reflect the natural garden feel of the party. And don't be afraid to have fun with your food. These miniature shrimp salad sandwiches are topped with green onion and cut into hearts for a fun, feminine touch.

Party Menu
Honeycomb served with Blue Cheese, Blackberries + Pears
Salmon Lollipops
Shrimp Salad
Tomato Sandwiches
Key Lime Cake
Martha Washington Candy

Sweeter Than Honey
Create a simple yet impressive appetizer display by ordering a square of raw honeycomb, then arranging it on a wood cutting board with ripe pears, fresh raspberries and a strong blue cheese like Roquefort or Stilton. Set out knives so guests can help themselves by digging out pieces of fresh honey to drizzle over the cheese and fruit.

Flip the Switch
After guests have finished eating lunch, clear the table of the flowers, runner and dinnerware, and leave the butcher paper to serve as a workspace that can be thrown away for quick cleanup at the end of the party. Give each guest the tools she'll need to get started with her own arrangement: a pretty vase or pitcher, pruning shears and an apron.

Class Time
Invite a florist or experienced friend over to lead the flower-arranging instruction and teach tips to the group. At this particular party, instructor Ash Bailey from The Byrd Collective shows guests which foliage works best for forming a stable base for the rest of the arrangement. Rather than prescribing a formula or "recipe," she teaches guests how to have fun with the flowers by putting together the colors and textures that capture their attention.

Fun With Flowers
After the lesson, invite guests to head to the "market" and choose the flowers they'd like to use for their own arrangements. Using their newly learned skills, everyone will have a blast creating their own beautiful arrangements. The instructor can circulate to each guest, offering assistance and guidance as they work.

Surrounded by Stems
Cleanup couldn't be easier: Simply roll up the butcher paper with all the stems on it, and toss into the recycling bin.

Capture Each Guest's Creation
This party is truly a feast for the senses, full of wonderful fragrances, mouthwatering tastes and all-around beauty. Allow guests to take their arrangements home as a keepsake of the fun afternoon shared with friends, food and flowers.

By An H