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GT4 as an investment

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Old 03-07-2018, 04:50 PM
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Jaws1
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Default GT4 as an investment

I'm going to get the scoop from my accountant, but in the meantime if I wanted to buy a GT4 through my company as an investment what would CRA use as a litmus test to make this a permissible investment?
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Old 03-07-2018, 05:42 PM
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ronnie993tt
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The question is worded a bit oddly but I assume you're looking to avoid taxes on an eventual sale. Get your accountant to confirm it but, a car in your name is personal use property and as long as you keep it for a year or so and aren't doing volume, there is no capital gains tax.
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Old 03-07-2018, 05:49 PM
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Originally Posted by Jaws1 View Post
I'm going to get the scoop from my accountant, but in the meantime if I wanted to buy a GT4 through my company as an investment what would CRA use as a litmus test to make this a permissible investment?
Not the smartest thing to do. You have high risk of audit depending on how you treat HST (normally can't deduct all HST on vehicle), and it'll also be unusual if you don't have stand-by charges on the car (and if you have stand-by charges its no longer an investment). As for a car being an investment, look at historical returns. Once this market turns, prices will plummet, and you probably won't be able to declare a terminal loss because of the class of vehicle.

Originally Posted by ronnie993tt View Post
The question is worded a bit oddly but I assume you're looking to avoid taxes on an eventual sale. Get your accountant to confirm it but, a car in your name is personal use property and as long as you keep it for a year or so and aren't doing volume, there is no capital gains tax.
This won't work if you try to have the car classified as an investment in the company. There will be a capital gain, and given the new investment income rules, it'll have other implications if you were to realize a capital gain.
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Old 03-07-2018, 07:08 PM
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It is now standard amoungst accountants that capital gains on cars should be reported and pay taxes.
If you are talking about writing off the expense of the car (rather than using after tax dollars to purchase) I think you could go ahead and do that.
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Old 03-07-2018, 07:15 PM
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I would probably take out an auto loan from the company, pay interest at 1% prescribed rate and buy the car in personal name.
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Old 03-07-2018, 08:04 PM
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Mr. Turtles
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Originally Posted by Jaws1 View Post
I'm going to get the scoop from my accountant, but in the meantime if I wanted to buy a GT4 through my company as an investment what would CRA use as a litmus test to make this a permissible investment?
No such thing as a permissible investment in the CRA world. Anything can be an investment. The CRA will try to tax just about anything when you make money. Certain exceptions exist such as lotteries. Losses on the other hand are generally only allowed if there was a "reasonable expectation of profit". Meaning our DE days can't be deducted as race car business expenses. If there is a subsequent gain on a corporate asset (including a GT4) it's a question whether the income is income or capital. Capital is taxable at 50% and its likely you would have a very strong argument that its only a capital gain assuming you are not normally in the car investment business.
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Old 03-07-2018, 11:42 PM
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You can invest in whatever you want. A car will have to be registered in the companies name. It has to be used for company business. If you are audited I suspect it will be dissallowed. Maybe if you put 0 kms on it and sold it at cost or profit, rented or leased it at a shown profit., you might have a case. If you depeciate it then it becomes a specified class asset and not an investment. After insurance, maintenance and taxes I'd like to see how you are coming up being able to call it an investment, Just my .02 good luck
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Old 03-07-2018, 11:58 PM
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996AE
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GT4

Seems there are quite a few for sale right now. 95k to 110k ask. Many virgin low mile cars. My buddy just bought a GT4 5k mi car for 100k. Perfect, one owner, never tracked, new tires fully serviced CPO car. A few nice options. Not a stripper, although they are nice to look at, I mean can be a good buy.

Cars and "investment" is only when I am explaining to my wife why I had to buy another P car. Its an "investment" I always tell her. For my mental health not so much for our financial heath.

After cost of funds, insurance, maintainance, DVM cost few P cars will "make money". Gt4 appreciation is not likely but who knows. For me its that there were too many built to be an investment car. Possibly lower deprection than other cars in this price range but an investment car I dont think it fits. Who knows 40 years from now.

For me I get bored easily and dont keep my P cars more than 3-4 years and then move on. I always spend to much for my toys, take way to good of care of them and then sell under market becuase whil eI do enjoy buying I dont enjoy the selling part.

Good luck. Fun car no matter what you decide.
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Old 03-08-2018, 05:05 PM
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If your accountant is a friendly car guy, rennlist member. Be ware.
If you were American, I'm sure there is a loop hole.
As a Canadian, if there were a loop hole, it would close without your knowledge.
And you would be fined retroactively with two weeks grace payment notice .
Guilty, until proven innocent. Is the CRA slogan.

And if you ever did, "make any gain". It would be taxed, read 50%-ish.
$100k in a car, hold it for five years. New value $150k.
Insurance per year $2k. storage $2k. = $20K in five years. profit of 30k - CRA cut = $15k profit.
Put 100k into the market at 5% a year.
Only polygamy is more foolish. I can only disappoint one woman at a time.
Is how I see it.
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Old 03-08-2018, 05:53 PM
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No chance you'll make money on the GT4 so go for it! ;-)
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Old 03-08-2018, 06:08 PM
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CRA are asssholes. They have no idea on vehicles that appreciate and will be worth more tax money for them in the long run.

I tried parking a 997.1RS in my dealer inventory as an investment automobile back when it was worth $100k.
CRA said no.

That car is now worth $175k.

The GT4, would be an even harder sell. But if they no longer make them in manual or the become turbo someday, the N/A GT4 will have decent long term value.

I think if you really inquire with CRA they would come to agreement based on your proof of "storage" insurance, super low miles, bubble wrap, low production numbers and no personal use.
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Old 03-12-2018, 12:35 AM
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Originally Posted by ronnie993tt View Post
The question is worded a bit oddly but I assume you're looking to avoid taxes on an eventual sale. Get your accountant to confirm it but, a car in your name is personal use property and as long as you keep it for a year or so and aren't doing volume, there is no capital gains tax.
there is no such exemption you speak of on personal use vehicles. See https://www.canada.ca/en/revenue-age...-property.html. Whoever told you this is probably just betting on the fact that the CRA doesn’t regularly check personal car sales, but if they do you’ll be on the hook.

big smoke’s comment is dead on.
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Old 03-12-2018, 04:00 PM
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I think what the OP might be trying to do is use 15% taxed business income in a holdco/investco structure to buy the car as an investment as opposed to having to take the money as a dividend or income and be taxed at a higher rate before using the money to buy the car.
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Old 03-13-2018, 06:32 PM
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Jaws1
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Originally Posted by LastMezger View Post
I think what the OP might be trying to do is use 15% taxed business income in a holdco/investco structure to buy the car as an investment as opposed to having to take the money as a dividend or income and be taxed at a higher rate before using the money to buy the car.
Yes. But I've come to the conclusion that it isn't worth the extra reporting/paperwork.
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Old 03-14-2018, 12:02 AM
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Buy the car, then rent it out to the company for promotion and advertising to clients for the amount no more than your amounts for the licensing , insurance and maintenance costs. After 5 years If you have not turned a profit then you can't call it a viable small business as there was no profit and stop doing it. Trade it in buy a GT3 and try the business again......... oh just write down all the clients who sat in or drove the car
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