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Mr. Ingram,
Hopefully this topic will be useful for some of your other recently wed readers.
The sequence of events might seem complicated but I have a feeling many newly married couples will follow a similar pattern.
Here is our sequence of events:
- I owned a condo (under my name only)
- We got married (condo remained under my name)
- I sold the condo and temporarily put the money in our joint account
- We both deposited some other money into joint account (gift from parents etc)
- We bought a house (under both our names)
- We sold the house and put the money in our joint account
- We bought another house (using mortgage + money in joint account)
How is the tax divided from the interest income when it's income tax time.
Thank You,
D. Low
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david ingram replies:
The answer is a simple mathematical equation governed by Section 74.1 of the Canadian Incoem Tax Act
The interest on "your" money is taxable to you. The interest on your spouse's money is taxabe to your spouse.
Increases from sales to third parties are considered those of your spouse, even if the original capital came from you.
Let's do an example and pretend that the original condo was worth a convenient $100,000.00 and all sales resulted in a profit.
1. Original sale $100,000 into the joint account - all interest is taxable to you.
.
2. You add $10,000 from your parents and your spouse adds $15,000 from his or her parents. - any interst received after the $25,000 addition is taxable at 110/125 x's the interest to you. Your spouse pays tax on $15/125 x's the interest.
3. You buy a $250,000 with $125,000 down and $125,000 mortgage.
4. You sell the house for $350,000 in both your names and put $225,000 in the bank and earn $5,000 interest.
5. Your new shares are: You - $110,000 plus $50,000 from the purchaser equals $160,000
Your spouse is $15,000 plus $50,000 from purchaser for $65,000
6. You pay tax on $160/225 x's $5,000 of interest
Your spouse pays tax on $65/225 x's $5,000 of interest
As I said, it is a simple mathematical extension but a very good question that will have our American readers scratching their heads and saying; "only in Canada you say!"
.
David Ingram's US/Canada Services
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
4466 Prospect Road
North Vancouver, BC, CANADA, V7N 3L7
Res (604) 980-3578 Cell (604) 657-8451
(604) 980-0321
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Disclaimer: This question has been answered without detailed information or consultation and is to be regarded only as general comment. Nothing in this message is or should be construed as advice in any particular circumstances. No contract exists between the reader and the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent and appropriately qualified legal practitioner or tax specialist in connection with personal or business affairs such as at www.centa.com. If you forward this message, this disclaimer must be included."
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This from "ask an income tax and immigration expert" from www.centa.com or www.jurock.com or www.featureweb.com. Canadian David Ingram deals daily with tax returns dealing with expatriate:
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David Ingram of the CEN-TA REALTY Group
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
(604) 980-0321 - Fax 913-9123 [email protected]
www.centa.com www.david-ingram.com
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