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My question is: Canadian-specific
QUESTION: Hello - my husband & I are going to try a trial separation for 6
months. We currently own a condo under both our names, and we are mortgage
free. My husband wants to buy another condo under his name only to live in
during that 6 months, and if we get back together, we will rent out that
condo, and he will move back in with me. Since he already has his name as
part owner of our current condo, what are the tax implications if he buys
another one & lives in it for at least 6 months ? Should we also get a
lawyer? Any advice would be appreciated. He will also consider transferring
the full title of the current condo to my name.
Thanks very much in advance.
AXXXXX XXXXXXXXX
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David Ingram replies:
As much as I would love to give you a definitive answer here, It is just not
possible because of the variables.
I spent twenty years with my name in the Yellow Pages dealing with property
division at divorce time and finally quit advertising becuase of the
emotional turmoil and anger that can develop. I now usually only deal with
this for existing clients where I already "sort of" know and understand the
situation and both parties agree to deal with me as a "sort of" guidance
arbitrator.
However, I will make a couple of observations which apply to everybody.
1. a Canadian can only have one property free of Canadian Income tax for
the purposes of Capital Gains tax free.
Therefore, if your husband leaves with his name on your property and buys
another one for himself, one or the other will be taxable.
If he puts the present house in your name and it is "yours", then the
existing property and the new property would both be free of capital gains
tax.
If he moves back in with you in six months, his rental property will now be
taxable for capital gains purposes although there is a method of claiming it
tax free for up to four years by filing an election under 45(2) of the
Income tax to claim it as his personal; residence even though he is not
living in it. However if he were to exercise that option, the house in your
name will now be taxable.
I would not make any suggestions to you with the information available. The
best thing to do will depend upon your relative incomes, children (if any),
the value of the present condo and the value of the new one.
Do you need a lawyer? Likely not because of your apparent friendliness.
Should you have a lawyer? A big resounding "YES"!!!
Both of you get hold of and read Wendy Dennis' book "DIVORCE FROM HELL".
It is a primer for anyone considering a divorce. Does your husband need a lawyer - same anwser - "YES".
Get a written separation put together even if it does cost you $500 to $1,000. It will be money well spent if you do not get back together and even more value if you remain apart.
I am assuming that your husband will read this first because the return address is to a male name.
Hope this helps
David Ingram of the CEN-TA Group
US / Canada / Mexico tax and working Visa Specialists
Property Division on Divorce an "OLDE" Specialty
108-100 Park Royal South
West Vancouver, BC, CANADA, V7T 1A2
(604) 913-9133 - Fax 913-9123 [email protected]
www.centa.com www.david-ingram.com
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