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Advanced Tax Planning & Strategies
Peter Cuttini | pcuttini@bdo.ca | @petercuttini
George Dube | gdube@bdo.ca | @georgeEdu...
Who are we?
Real estate investors
Real estate accountants
Tax and business advisors
Working with clients across Canada
and...
Our blog and tax checklists
www.bdoreinvestor.ca
George & Peter
@georgeEdube | gdube@bdo.ca
@petercuttini | pcuttini@bdo.c...
The right foundation
Case studies
The good, the bad, and the supremely organized – accounting and bookkeeping
JV and share...
Getting the Right Foundation
Proper structure means…
Proprietorships
Corporations
Trusts
Partnerships
Limited partnerships
Joint ventures
Common Business Structures
Flexibility of choices
Legal issues
Taxation impact
Financing perspective
Investment and business
considerations
Framework
Corporate application:
Why incorporate?
When to incorporate?
What activities does the corporation do?
How do I start?
Prop...
Proper and flexible structure now
saves $
Everyone is different
Preparation and organization
generate additional savings p...
Forget the fancy-dancy deductions
Structure yourself properly to save taxes
Consider investment and other activities
Prope...
Disadvantages to Corporations
Tax risks of change
Cost to implement
Cost to maintain
Some additional work
Do it right the ...
Incorporating is still not always the
right choice
Can be a waste of time and $
Find out what’s right for you!
Recommendat...
Give unto Caesar what is Caesar’s
(Pay your fair share)
Structure yourself to consider where the
tax system is heading.
We...
Government knows tremendous
advantages corporations provide in
many cases
Increasing restrictions and tax rates
on incom...
How investments are held
Exit and operating strategies
Number of investors
Opportunities for estate and succession
plannin...
Potential Structure Ideas
(but not all at once – and maybe
only a small portion):
Proper Structure
1.
2.
Potential Structure Ideas
(but not all at once – and maybe
only a small portion):
Proper Structure
3.
4.
Potential Structure Ideas
(but not all at once – and maybe
only a small portion):
Proper Structure
5.
Don’t get caught up in the excitement
Multiple Entities?
Case Studies
Determining the right structure…
Jack and Jill
Combined family income $60,000
Plan to buy 1 or 2 income properties
Small pension and/or RRSPs
What structur...
Nabil owns small engineering firm as an incorporated business
Down payment for any properties purchased coming from incorp...
Bill and Lisa
Lisa earns $150,000/year
Bill earns $20,000/year
Three kids – ages 13, 10, and 7
Plans to purchase 3 or more...
Aman and Sara
Sara earns $170,000 and Aman earns $165,000
Plans to purchase 3 or more properties, in addition to investing...
Billy Bob and Bobby Sue
High income earners
Registered savings
Investing through RRSPs and TFSAs
Planning for tax-deferred...
Grandma and Grandpa (or soon to be)
Wanting some income
Want to pass some wealth to kids and/or grandkids
What structure d...
Paul and Kim
Two kids – 13 and 10
Charitable aspirations
Looking to invest in two provinces
Good income but will need JVs
...
But what structure do you need?
Every situation is unique
The good, the bad, and the supremely
organized
Accounting & Bookkeeping…
Identify more deductions
Keep track through the year
Can’t get where you’re going without a plan
CRA doesn’t buy “dog ate ...
Be Organized
=
Better Cash Flow
=
More Tax Deductions
Checklists for identification of ideas at
www.bdoreinvestor.ca
Ideas vs. reality tailored to your situation
Short, medium,...
JV and Shareholder Agreements Critical
The Right Stuff…
JV agreements
Shareholder agreements
Limited partnership
agreements
Partnership agreements
Make sure you’re using the
righ...
Define the legal and tax matters, plus
responsibilities
Specify WHICH entity is acquiring
Demonstrate agreements completed...
Exit
Entrance
Communication planning
Decision making
Growth
Transition
Lifestyle
Keys to Consider:
Don’t Forget About
A Few Items…
Estate & Succession Planning
It’s about living, not dying!
U.S. Planning
Investing in the US = cross-border accounting needs
Charitable Giving
Special area…real estate investors using investments to give back
Common Pitfalls
Watch Out & Avoid These…
You cannot use a corporation and expect
financing
(Myth one)
Options can be more limited
Certainly more frustrating
It costs a lot more to get financing with a
corporation
(Myth two)
There may be an additional cost to do business
Also con...
Don’t assume
Watch legal agreements and
communications
Heavily litigated
Assignment
Rent to own
Capital Gains vs. Income
Is a Flip
Capital Gains
vs.
Income?
Flips
Investors Beware!
(the principal residence
exemption)
Principal Residence Exemption
How do I make my
interest tax deductible?
The Smith Manoeuvre
Making Bad Interest Good
Get the right information
Fill out the right forms
Watch valuations
Watch deadlines
HST Rebates
Advisors help create, grow,
and maintain wealth
Seek out and follow advice
Develop relationships vs advisor shopping
Judge...
100% of the work we do is done in Canada. We do not outsource
overseas.
Our Work
This presentation contains general comments and should NOT be
acted upon without the advice of a qualified tax professiona...
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Volition meetup 2019.03 - Peter Cuttini Slides

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The very first book I read that started me on the path to become a real estate investor, was Rich Dad, Poor Dad. In that book, Robert Kiyosaki uses an analogy on how wealth is built.

Think about wealth as water and your finances are a bucket holding that water. Most people have one tap filling that bucket - their job. But they’ve got lots of holes in that bucket - bills, car payments, their mortgage, and **TAXES**. To build wealth, you’ve got to turn on as many taps as possible and close as many holes in your bucket as possible.

Improper tax planning can be one of the largest drains on your real estate investments, so join us on March 20th and lean how to pay less tax! We’ll be covering topics like:

Corporations - When should I incorporate? Should I buy in a corporation? Taxes on corporations? Active vs passive income? Business corps - using profits to invest?
Estate Planning - How do I pass my assets down to the next generation?
Taxation Best Practices - What is building depreciation and why is it important? What is eligible for interest deductibility? How do I deduct the interest of my HELOC?

It’s essential to understand these things even if you only have one property. If you’ve already accumulated a few properties, it’s even more important to correct any mistakes you’ve made. Bad planning can completely kill some investment business cases, home flipping for example, so come learn how to do things right with one of the best in the industry!

Peter is a Real Estate Investment focused accountant and well known in the investment world. He regularly presents in front of hundreds of people at REIN meetings and is making the trip from Kitchener to speak to our group. His accounting firm provides strategic accounting and taxation services to grow your business and and protect your real estate investments. His partner George Dube literally wrote the book “Tax, Accounting, and Legal Strategies for the Canadian Real Estate Investor”.

Their services include:
> Assurance Services
> Business Advisory
> Real Estate Tax Planning and Structure
> Retirement & Estate Planning
> Tax Consulting
> Business Tax Compliance
> Personal Tax
> US and International Tax Services

To ensure that we are covering topics that are relevant to YOU, email your questions or scenarios to ming@volitionprop.com and we will “incorporate” them into the presentation… ;)

Published in: Real Estate
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Volition meetup 2019.03 - Peter Cuttini Slides

  1. 1. Advanced Tax Planning & Strategies Peter Cuttini | pcuttini@bdo.ca | @petercuttini George Dube | gdube@bdo.ca | @georgeEdube
  2. 2. Who are we? Real estate investors Real estate accountants Tax and business advisors Working with clients across Canada and around the world How we can help: Save taxes Structure assets Protect investments George Dube & Peter Cuttini Interested in an introductory consultation? Contact us at: ctavares@bdo.ca or (519) 904-3115
  3. 3. Our blog and tax checklists www.bdoreinvestor.ca George & Peter @georgeEdube | gdube@bdo.ca @petercuttini | pcuttini@bdo.ca @BDOCanada_REI Connect With Us
  4. 4. The right foundation Case studies The good, the bad, and the supremely organized – accounting and bookkeeping JV and shareholder agreements Three topics to consider Common pitfalls to avoid Covering
  5. 5. Getting the Right Foundation Proper structure means…
  6. 6. Proprietorships Corporations Trusts Partnerships Limited partnerships Joint ventures Common Business Structures
  7. 7. Flexibility of choices Legal issues Taxation impact Financing perspective Investment and business considerations Framework
  8. 8. Corporate application: Why incorporate? When to incorporate? What activities does the corporation do? How do I start? Proper Structure
  9. 9. Proper and flexible structure now saves $ Everyone is different Preparation and organization generate additional savings plus helps provide security No cookie cutter structure Incorporate, Why Care?
  10. 10. Forget the fancy-dancy deductions Structure yourself properly to save taxes Consider investment and other activities Proper Structure
  11. 11. Disadvantages to Corporations Tax risks of change Cost to implement Cost to maintain Some additional work Do it right the first time, but need to continue to do it right Proper Structure
  12. 12. Incorporating is still not always the right choice Can be a waste of time and $ Find out what’s right for you! Recommendations for Corporations
  13. 13. Give unto Caesar what is Caesar’s (Pay your fair share) Structure yourself to consider where the tax system is heading. Wealth Redistribution
  14. 14. Government knows tremendous advantages corporations provide in many cases Increasing restrictions and tax rates on income splitting plus some investing Attack on Business Owners and Investors
  15. 15. How investments are held Exit and operating strategies Number of investors Opportunities for estate and succession planning Significant increase in use of Family Trusts Tax Restrictions and Changes May Impact:
  16. 16. Potential Structure Ideas (but not all at once – and maybe only a small portion): Proper Structure 1. 2.
  17. 17. Potential Structure Ideas (but not all at once – and maybe only a small portion): Proper Structure 3. 4.
  18. 18. Potential Structure Ideas (but not all at once – and maybe only a small portion): Proper Structure 5.
  19. 19. Don’t get caught up in the excitement Multiple Entities?
  20. 20. Case Studies Determining the right structure…
  21. 21. Jack and Jill Combined family income $60,000 Plan to buy 1 or 2 income properties Small pension and/or RRSPs What structure do they need? Case Study #1 No real need for Corporation
  22. 22. Nabil owns small engineering firm as an incorporated business Down payment for any properties purchased coming from incorporated business What structure does he need? Case Study #2 99% of the time he will incorporate
  23. 23. Bill and Lisa Lisa earns $150,000/year Bill earns $20,000/year Three kids – ages 13, 10, and 7 Plans to purchase 3 or more income properties plus invest in land development What structure do they need? Case Study #3 Likely a Corporation Land development income 26.5% corporate tax rate
  24. 24. Aman and Sara Sara earns $170,000 and Aman earns $165,000 Plans to purchase 3 or more properties, in addition to investing in second mortgages Sara plans to take a 1 year sabbatical Two kids – 17 and 13 What structure do they need? Case Study #4 Likely a Corporation with a Family Trust
  25. 25. Billy Bob and Bobby Sue High income earners Registered savings Investing through RRSPs and TFSAs Planning for tax-deferred time bomb What structure do they need? Case Study #5 TFSA Maximizer
  26. 26. Grandma and Grandpa (or soon to be) Wanting some income Want to pass some wealth to kids and/or grandkids What structure do they need? Case Study #6 Potential a Family Trust
  27. 27. Paul and Kim Two kids – 13 and 10 Charitable aspirations Looking to invest in two provinces Good income but will need JVs What structure do they need? Case Study #7 Potentially a federally incorporated company Potential charitable foundation
  28. 28. But what structure do you need? Every situation is unique
  29. 29. The good, the bad, and the supremely organized Accounting & Bookkeeping…
  30. 30. Identify more deductions Keep track through the year Can’t get where you’re going without a plan CRA doesn’t buy “dog ate my records” CRA’s hindsight is terrific, your memory… Do your bookkeeping monthly or quarterly Organization
  31. 31. Be Organized = Better Cash Flow = More Tax Deductions
  32. 32. Checklists for identification of ideas at www.bdoreinvestor.ca Ideas vs. reality tailored to your situation Short, medium, and long-term plans to consider…many trade long-term success for short-term tax benefits Methodical Application of Plan
  33. 33. JV and Shareholder Agreements Critical The Right Stuff…
  34. 34. JV agreements Shareholder agreements Limited partnership agreements Partnership agreements Make sure you’re using the right one – the differences are profound The Right Agreement
  35. 35. Define the legal and tax matters, plus responsibilities Specify WHICH entity is acquiring Demonstrate agreements completed before closing (not manufactured afterwards) Be reviewed from a legal and a tax perspective (*Yes, even with friends and family) Proper Agreements Will:
  36. 36. Exit Entrance Communication planning Decision making Growth Transition Lifestyle Keys to Consider:
  37. 37. Don’t Forget About A Few Items…
  38. 38. Estate & Succession Planning It’s about living, not dying!
  39. 39. U.S. Planning Investing in the US = cross-border accounting needs
  40. 40. Charitable Giving Special area…real estate investors using investments to give back
  41. 41. Common Pitfalls Watch Out & Avoid These…
  42. 42. You cannot use a corporation and expect financing (Myth one) Options can be more limited Certainly more frustrating
  43. 43. It costs a lot more to get financing with a corporation (Myth two) There may be an additional cost to do business Also consider after-tax cost
  44. 44. Don’t assume Watch legal agreements and communications Heavily litigated Assignment Rent to own Capital Gains vs. Income
  45. 45. Is a Flip Capital Gains vs. Income? Flips
  46. 46. Investors Beware! (the principal residence exemption) Principal Residence Exemption
  47. 47. How do I make my interest tax deductible? The Smith Manoeuvre Making Bad Interest Good
  48. 48. Get the right information Fill out the right forms Watch valuations Watch deadlines HST Rebates
  49. 49. Advisors help create, grow, and maintain wealth Seek out and follow advice Develop relationships vs advisor shopping Judge value add vs. cost Work with great people who work with great advisors Expect quality, not perfection Balance today and tomorrow
  50. 50. 100% of the work we do is done in Canada. We do not outsource overseas. Our Work
  51. 51. This presentation contains general comments and should NOT be acted upon without the advice of a qualified tax professional. While there may be similarities, every situation is different. Disclaimer

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