My question is: Canadian-specific
QUESTION: My parents have a second home that they are currently renting out.
They are thinking about transferring the property to me and we were
wondering what taxes would apply. We are aware of the Property Transfer Tax
and we've read that I may be exempt if I live there 6 months prior to the
transfer. Is there any other tax we shoud know about? As well, after the
transfer is completed and I decided to sell the house to buy another in a
couple years, would I need to pay for captital gains?
Thanks for your time,
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david ingram replies:
There are two questions in a row where I am not giving out the answers that
people will want to hear.
When the house is transferred to you it is a deemed sale at fair market
value, They will owe capital gains tax on any increase in value. In
addition, if they have been claiming CCA (depreciation) over the years, they
will need to pay recapture tax on the depreciation claimed.
There is NO exemption for PPT (property purchase tax) if they are
transferring a rental house to a son. And, if you moved in without paying
rent, it would be a deemed disposition and your parents would owe the above
taxes when you moved in, not when it was transferred to you although they
can make an election to defer the tax until the actual transfer under
Section 45(3).
--------
If you are moving in as your principal residence, there would be no tax on
any increase in value when you sell it in the future.
However, if this is a plan to try and transfer the house to you so that it
will "look" like a principal residence and you are not getting the house for
the purposes of a genuine principal residence, then it would be taxable.
goto www.centa.com and read the capital gains section of the TAX Guide in
the top left box.
--------------
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