Investing in Canadian real estate remains a proven strategy for building wealth. However, one of the most critical decisions you’ll face as an investor is how to structure ownership of your property. Your ownership model can significantly affect your tax obligations, liability, estate planning, and long-term financial goals.
This guide explores the four main structures for owning real estate in Canada:
1. Personal Ownership
Simple & Direct
This is the most straightforward approach—holding property in your own name.
Key Considerations:
- Co-ownership Options: Joint Tenants (with right of survivorship) vs. Tenants in Common.
- Taxation: Rental income is taxed at your personal rate but qualifies as earned income (adds to RRSP contribution room).
- Disposition: Capital gains and CCA recapture may apply upon sale or transfer.
- Risks: Exposure to personal creditors and marital claims.
2. Partnership Ownership
Shared Investment for Business Partners or Family
A partnership allows multiple individuals to share ownership and profits based on a formal agreement.
Key Considerations:
- Flow-Through Taxation: Income and losses pass through to partners.
- Estate Planning: May avoid probate with proper secondary wills.
- Liability: Varies—general vs. limited partnerships.
- Complexity: Legal setup and annual filings required.
3. Corporation Ownership (CCPC)
Tax Planning & Succession Flexibility
Owning property through a Canadian-controlled private corporation offers added legal protection and tax planning tools.
Key Considerations:
- Two-Tier Taxation: Corporate income and shareholder dividends are both taxed, but integration rules apply.
- Income Splitting: Limited under TOSI rules.
- Estate Planning: Share transfer (not asset) on death may reduce probate but triggers capital gains.
- Drawbacks: No principal residence exemption; use by shareholders may trigger taxable benefits.
4. Trust Ownership
Structured for Estate & Succession Planning
Trusts separate legal ownership from beneficial ownership, offering powerful estate planning tools.
Key Considerations:
- Types: Inter vivos (during life) or Testamentary (on death).
- Taxation: Trusts taxed at top personal rates unless income is distributed to beneficiaries.
- 21-Year Rule: Trusts deemed to dispose of property every 21 years for tax purposes.
- Pros: Creditor protection, probate planning, income splitting (if structured carefully).
- Cons: Setup and annual costs, complex tax compliance.
Comparing Structures at a Glance
| Ownership Type | Key Benefits | Key Drawbacks |
| Personal | Simple, RRSP room, rental loss offset | No income splitting, full probate exposure |
| Partnership | Income flexibility, limited liability | Setup/legal costs, limited income splitting |
| Corporation | Asset protection, tax planning | Double tax, no principal residence exemption |
| Trust | Creditor protection, flexible estate planning | High tax rates, complex rules, 21-year rule |
Seek Professional Advice
Choosing the right ownership structure is complex and depends on various factors: investment goals, tax implications, succession plans, and personal circumstances.
Before investing, consult your:
- Tax advisor
- Estate planner
- Legal counsel
- Financial advisor
At Flashbooks, we can help you navigate these decisions with tailored advice. Contact your Flashbooks professional today to get started.
