In short: Selling a personal condo or home to a Medical Professional Corporation usually backfires because a corporation cannot use the principal residence exemption, so future growth is taxed inside the corporation and again when paid out, and any continued personal use of the property is a taxable shareholder benefit with no deduction to the corporation. ZAI Wealth Management explains the added land transfer and disposition costs, the provincial college restrictions, and what to do with corporate surplus instead.
You lose the principal residence exemption
Only individuals can shelter gains on a home with the principal residence exemption. Once a corporation owns the property, future growth is taxable inside the corporation, and again when paid out to you.
Personal use creates a taxable benefit
If you or your family keep using the property, the value of that use is generally a taxable shareholder benefit to you personally, often with no deduction for the corporation. That can wipe out the advantage you were hoping for.
Other issues
- The sale is a disposition for you and may involve land transfer costs.
- Your college may restrict an MPC from holding non-practice assets.
There are usually better ways to use corporate surplus. See our physician tax strategy guide.
Run your own numbers with our Physician Tax Savings Calculator.
For illustration and general information only. Tax rules change and every situation is different, so speak with your advisor and accountant before acting on anything here.
Common questions
Should a physician buy their clinic building inside the medical corporation?
Usually not. Owning the building inside a Medical Professional Corporation exposes it to practice liability, can create double tax on sale, and can cost the physician the $1.25 million Lifetime Capital Gains Exemption on the MPC shares if non-practice assets become too large. The common alternative ZAI Wealth Management uses is a separate property company that owns the building and charges the MPC fair-market rent.