Personal name or incorporated company: what changes when you build to sell?

“I often see situations where somebody holds a residential property in their personal name. Maybe they bought it a few years ago to obtain residential financing, or it is their principal residence and they are now deciding to redevelop it and sell.”

The ownership decision deserves attention before construction starts. Moving a property into a corporation can create an immediate transfer cost, while keeping profits inside that corporation can leave more capital available for another project. Taking all the profit home is a different calculation.

First, separate ownership from the nature of the profit

CRA looks at the facts: your intentions, development activities and how the property is marketed and sold. Incorporating does not turn development profit into a capital gain. Equally, keeping title personally does not make a build-for-sale project a passive investment.

If a genuine home or long-term investment is later converted into a development for sale, pre-development appreciation may be treated differently from subsequent business profit. A principal residence exemption may apply to an eligible earlier period; rental property can also involve depreciation recapture. The relevant value and conversion date need to be established, rather than assuming every dollar since 2020 has the same treatment. [1, 2]

The example: one property becomes four homes

An owner bought a residential property in 2020 for $1,250,000, in their personal name, using a residential mortgage at 1.99%. They now plan to construct a fourplex for sale.

What does the transfer into a corporation cost?

BC property transfer tax (PTT) normally uses the property's fair market value when title is registered—not the old purchase price, mortgage balance or a nominal price between you and your company. An ordinary transfer to your own company is not automatically exempt. [6]

The corporation's project cost in this model includes that $23,000, reducing its taxable profit to $2,077,000. It is deducted once through the cost of the sold inventory. Keeping title personally avoids this additional transfer PTT.

An income-tax rollover under section 85 may defer tax on an eligible transfer, but it does not itself exempt BC PTT. The property must qualify: real property already held as inventory is generally excluded from section 85's eligible property rules. Review the sequence before committing to a transfer or starting development. [7]

How was the dividend tax calculated?

The corporation is assumed to start with no general rate income pool (GRIP), the balance that limits eligible dividends. Schedule 53 adds 72% of qualifying general-rate taxable income: $2,077,000 × 72% = $1,495,440. The model pays that amount as eligible dividends and the remaining $20,770 as non-eligible dividends. It does not assume every dollar of corporate cash qualifies for the lower dividend rate. [8, 9]

Using the statutory gross-ups and dividend tax credits, the top combined BC personal rates are approximately 36.54% on eligible dividends and 48.89% on non-eligible dividends. The resulting personal dividend tax is about $556,629. Calculations use the underlying formulas before rounding. [3, 9, 10]

What if the company qualifies for the small-business rate?

An eligible CCPC with a full available $500,000 business limit can pay a combined 11% on that qualifying portion and 27% on the remainder. Incorporation alone does not establish eligibility. Associated companies share the limit; other income, taxable capital, passive income and a short taxation year can affect access. Whether this development constitutes a business carried on by the corporation must also be reviewed. [4, 5, 11]

The lower corporate rate increases the amount retained, but also changes the dividend mix. It does not guarantee more personal spending money after a full payout. Leaving profit invested and paying dividends in future lower-income years can change the outcome; that requires a separate, year-by-year plan.

GST: a separate calculation in both structures

New homes sold by a builder are generally taxable supplies, whether the builder is an individual or a company. Here the $1,250,000 per home is assumed to be plus 5% GST: $62,500 per unit, or $250,000 collected across four sales. GST collected is not sales profit. [12]

Net GST payable is output tax less eligible input tax credits and applicable adjustments. If every dollar of the $1,650,000 net construction budget bore 5% recoverable GST, those construction credits would be $82,500, giving $167,500 net GST before other credits or adjustments. That is a conditional illustration, not a verified remittance: payroll and other costs may not bear GST, and invoice details matter.

If the stated selling prices instead include GST, $5,000,000 ÷ 1.05 leaves only $4,761,905 of revenue before rebates or adjustments—$238,095 less than the main model. The income-tax tables would need to be recalculated. Buyer rebates and assignments must be checked separately; none are assumed here.

The transfer itself is assumed to be an exempt sale of existing used residential housing before commercial redevelopment activity begins. Do not assume that exemption applies after a conversion to commercial use: the timing and GST status of the land transfer require their own review. [12]

What if the land is now worth more than $1.25 million?

Obtain a supported valuation before choosing the structure. If today's value were $1,750,000, the general BC PTT on transfer would be $33,000. The $500,000 increase since purchase would also need its own tax analysis. It cannot simply disappear because the property moves into your company.

For a genuine former principal residence, the eligible earlier gain may qualify for an exemption. For an investment property, a capital gain and possible recapture may arise. Retaining personal ownership can also require a capital-to-inventory analysis; incorporating is not the only circumstance in which pre-development appreciation matters. A rollover may defer an eligible gain rather than erase it. None of these alternative facts are included in the main table. [2, 6, 7]

The financing has to follow the ownership plan

The historical 1.99% residential mortgage explains how the property was acquired. It does not establish today's rate or permission to demolish, redevelop or transfer title. Discuss lender consent, any payout penalty and replacement construction financing before changing ownership.

A corporation can help organise a development business and separate project records, contracts and ownership interests. Personal guarantees, lender security and other obligations can still create personal exposure. The borrowing company, registered owner, GST registration, insurance and construction contracts should be coordinated by your broker, lawyer and accountant.

Before you start, put these five items on one page

1. Property history: purchase records, occupancy, rentals, earlier intentions and any depreciation claimed.
2. Current valuation: fair market value before redevelopment and the relevant change-of-use date.
3. Complete project budget: hard and soft costs, transfer costs, interest, selling costs and GST assumptions.
4. Personal cash needs: how much profit you need now and how much can remain in the business.
5. Financing and tax plan: title, guarantees, business-limit availability, transfer mechanics and an accountant's written tax comparison.

The better structure depends on what happens to the profit after the homes sell.

For this example, a corporation provides more initial capital for another project, while a full immediate payout produces slightly less personal after-tax profit. Your current land value, other income, actual costs and withdrawal timing can change that result. Decide on the structure before the financing and construction commitments are finalised.