QUESTION: Hi David -
Sorry if this is a repeat question about capital gains, but I couldn't find
a similarly posed one.
I'm wondering if there is any obligation to sell a property at "Fair Market
Value", or if the Fair Market Value is used to determine capital gains
taxes.
For example, is it possible for me to purchase an "arms-length" (i.e. not a
family member etc.) owner's non-principal residence for $1, even though the
property is worth, for example, $400,000? Would they still need to pay
capital gains based on the FMV? Could they claim a capital loss on the
disposition if they sold at under the FMV below the ACB? Would I have any
tax implications or restrictions placed on me, if this then became my
principal (and only...) residence?
If this cannot be arranged, is there any other way for someone to "dispose"
of or gift a property to a non-family member without the owner incurring the
capital gains tax?
Your thoughts on this issue would be appreciated.
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david ingram replies:
The property is deemed to have been disposed of for FMV no matter who bought
it unless something can be shown to have changed the value dramatically such
as possible flooding, landslide, change of road access, etc.
And why would anyone sell you a property for $1 when it was worth $400,000?
if not a non-arms-length person.
A NON-Arm's length person does not have to be a family member. It can be a
friend, business partner or a next door neighbour.
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