(Like the Family Cottage and other Appreciable Asset)
The personal tax exemption on capital gains is long gone! (Shock?! Surprise!!) What does this mean to you besides the exposure to more taxes. Any asset that has a chance increase in value is subject to capital gains tax. Bonds, stocks, real property like condos, cottages, rental property etc. are all considered appreciable assets and exposed to gains tax.
Everytime your asset grows the gains tax liability increases. You do not have to pay this tax until you dispose of the asset. Disposing of the asset means to transfer the ownership from you to someone else, by selling it, gifting it, or through as succession (death).
Well, this gains tax effects cottage owners particularily. No, more specifically, to cottage owners who don't and never did consider their cottage as an investment. If you are like most in this category, you are probably like me, a first generation Canadian who's father bought a small cottage property in the late '50s or early '60s. for less than $1,000. The family probably invested substantial amount of "sweat equity" and erected the shell of a family cottage from scratch with friends and relatives over several blackfly ridden spring weekends, then spent the next 15 years finishing the inside to a rustic 'early Muskoka' interior decor.
Truly a labour of love! Hardly an investment.
After 30 years there she sits, the family cottage, a shrine of memories. Memories of the first swim of the year on the May 24th weekend [brrrr.. vivid memories]; early morning fishing outings; dusk to dawn card game marathons; midnight skinny dips, just to name a few classic universal cottage activities. Then there are the priceless memories; Suzy's first swim strokes and her encounter with a garter snake; Johnny's first fish; Fido's run in with a porcupine; the Saturday night socials at the local dance hall, then Suzy's first kiss causing Mom and Suzy to talk endlessly on the porch; or the long father to son talks by the camp fire. Truly, many first in our lives occurred at the cottage. We have a cottage for the same reason as we have photo albums.
Most of us view the cottage as
an album of memories,
...not an investment asset.
If you're like thousands of other cottage owners, the next 30 years are already clear in your mind. You intend your children to share the same experiences and create the same wonderful memories with their kids, your grand children, as you did with yours.
But are you sure this dream can be realized?
For a Personal Review and Strategy GO HERE
Well, while you were accumulating all this wealth of memories over the past 30 years your cottage has also accumulated a sizable wealth or worth, of its own, on paper.
I'm sure you have with some pride admitted to family and friends the Fair Market Value of the cottage, probably 30 to 50 times or more its original cost.
I emphasize, paper value,
...cause it doesn't produce any money
unless you sell it.
...But you don't want to sell it!