Can my medical corporation own my professional building?
Technically yes, but usually not the right structure. The tax and asset-protection standard is: a separate real estate Holdco owns the building and leases to the Medical Professional Corporation on arm’s-length rent. This isolates the building from professional liability, preserves the MPC’s LCGE-eligibility on eventual sale, and separates the building’s future capital gain from the medical practice tax pool.
Why not in the MPC. If the MPC owns the building, three problems: (1) real property is not a QSBC-eligible asset for LCGE unless used in active business – a building rented largely to third parties fails the 90% asset-use test on a future sale; (2) any professional liability claim against the MPC exposes the building; (3) the building’s appreciation is trapped inside the MPC’s tax pool, potentially subject to the passive-income SBD grind if rent is treated as investment income.
Standard structure. Physician owns 100% of two corporations: MPC (voting shares held by physician, non-voting held by family under s. 3.2 OBCA) and RealtyCo (a plain CBCA numbered corp holding the building). RealtyCo leases to the MPC on arm’s-length commercial rent (FMV rent supported by an appraisal or comparable-lease study).
Rent from the MPC. Deductible to the MPC as an active business expense under ITA s. 18(1)(a). Received by RealtyCo as either active business income (if RealtyCo employs more than five full-time employees – rare) or specified investment business income (passive, taxed at the general corporate rate, no SBD).
File a s. 156 election (Form GST44) between RealtyCo and MPC so intercompany rent flows without HST cash flow.
Note: CPSO does not require the MPC to own its premises. There is no professional-regulatory downside to the RealtyCo-plus-MPC structure.
Source: canada.ca â Rental income
— Bader A. Chowdry, CPA, CA, LPA — Insight Accounting CPA
Disclaimer: Bader A. Chowdry, CPA, CA, LPA is a Licensed Public Accountant regulated by CPA Ontario. Insight Accounting CPA Professional Corporation is a Chartered Professional Accountant firm. This content is general information only and does not constitute professional advice for your specific facts. Confirm current rules and figures with your own advisor before acting.