How does "right of survivorship" work with joint tenants owning property in Ontario?

[carverman]

If there are capital gains payable, they will be due when she disposes of her interest in the house whether it is through her estate or while she is living.

MG. I am confused by this statement.

In a previous inquiry by "BELGUY" on the CMF forum in 2010..you mentioned..

<quote>
Belguy - I hope your posting problems resolve!

I spoke with two CAs earlier this week and asked them whether there was any issue with a PR held jointly by a mother and adult child, when the child has no other residence. Both of them said that they did not think there was any issue to be worried about.

I also read the MoneySense article. The article could have been more clear - the intention was to describe a situation in which the child (who co-owns a house with a parent) also has a completely separate principal residence.

The long and the short of it is that I don't think you have anything to worry about from a tax point of view in co-owning a house with your mom.
<unquote>

In my case, my mother owns a principle residence (PR) in Toronto and is sole owner of her house. (I am not on title of the Toronto property).

I own a home in Ottawa jointly with her and this is MY principle residence for 16 years. (I pay all expenses on it and paid off the mortgage on it).

1. Upon her death, is there Capital Gains (CG) payable on her ownership of my property, even though the property ownership reverts
to me 100%.
2. Who has to pay the CG..me or my mother's estate?
3. How is the CG determined on her joint ownership of my property?

a) At time of her death?
b) after the house is sold by me
c) How is the CG on her ownership of my property determined?
some legal document filed by me based on the current tax assessment

Thanks

[MoneyGal]

Thanks for finding that old thread. I don't think you have anything to worry about from a tax POV, just like I said earlier. My only point in my post from this morning was that if there is a capital gain, it becomes due when she disposes of her interest in the house - whether that is before her death or not (and at her death, her interest forms part of her estate).

In fact, it is probably clearer for you and for her estate planning if she disposes of her interest now. If she dies and is a co-owner of your house, her interest transfers to her estate.

[carverman]

In fact, it is probably clearer for you and for her estate planning if she disposes of her interest now. If she dies and is a co-owner of your house, her interest transfers to her estate.

MG I'm confused.

From what I discovered on line (real estate lawyer's blog), a jointly owned property ( in this case mother and son), automatically reverts" by some implied legal mechanism to the son.

So the way, I see it at that point, I am the sole owner of the property. Are you saying that her interest (upon her death) transfers to her estate? And her estate has to pay capital gains on
her interest in my property?

Yes, I agree, it is better to get it transferred to me before she passes. With my divorce final 12 years ago, she doesn't need to protect my property from litigation by my ex.

[kcowan]

We sought advice about being on title on MILs house in Richmond and Brother's house in Toronto. We would avoid probate fees upon death but expose ourselves to CG on both houses. We decided to just pay the probate fees.

When she dies, her estate must pay the CG on her portion of your house. The title will transfer to you but you must register the transfer. Probate fees will also be due on the gross amount of her portion of your house out of her estate. Without any documentation to the contrary, her share of your house is 50%. This will become part of her estate.

This was a very bad deal for you. But that is what you exposed yourself to by having her on title. I hope whatever it was protecting you from was worth it.

[MoneyGal]

Huh. I needed to re-read my original post earlier. My advice to Belguy was in respect of HIS tax situation (also, if I recall correctly, there were no other beneficiaries of his mother's estate). You are asking about your mother's tax situation. I agree with kcowan, above. You need professional legal estate-planning advice. Your mother has an ownership interest in your house. However, as it is NOT her principal residence, CG taxes may be due.

Belguy was about HIS tax principal residence exemption for a house he co-owned with his mom and also occupied as his principal residence. You are asking about your mom's tax situation for a house you co-own with her and she does NOT occupy as her principal residence.

[carverman]

When she dies, her estate must pay the CG on her portion of your house. The title will transfer to you but you must register the transfer. Probate fees will also be due on the gross amount of her portion of your house out of her estate. Without any documentation to the contrary, her share of your house is 50%. This will become part of her estate.

This was a very bad deal for you. But that is what you exposed yourself to by having her on title. I hope whatever it was protecting you from was worth it.

I have started the process to get her to transfer her title to me. I consulted a lawyer here today in Bell's Corners (west end of Ottawa) and he advised me that if she no longer needs to be on the title (for whatever reason) to start transferring
her interests over to me, while she is still alive and lucid. I sent an email to my brother (who lives with her) to seek her agreement on that and I can initiate the paperwork from this end. All she has to do is sign.
Will I still have to pay probate fees if that is the case?

[MoneyGal]

Probate fees, no (these are fees paid when an estate is being settled).

Capital gains taxes, possibly yes, depending on your mother's overall tax situation.

Transferring her interest in the property to you is a disposition (on her part) which may give rise to CG taxes, depending on the increase in value over the time she has co-owned it. Whether she will actually pay any CG tax will depend on her overall tax situation, including whether she has losses she can carry forward.

[OhGreatGuru]

...
Transferring her interest in the property to you is a disposition (on her part) which may give rise to CG taxes, ...

The question is, what is her interest in the property? If she did not contribute to the downpayment, and has not paid any of the mortgage, her interest is zero from an investment point of view. Her name on the title was for administrative convenience and legal reasons as discussed by the OP. The mother may not have had "beneficial ownership" in CRA's terms.

Even if the mother helped with the down payment you could probably claim it was a gift to the daughter at the time.

In any case, as others have suggested, it would probably be worthwhile transferring title now while Mom can still answer questions about her intent.

[MoneyGal]

The question is, what is her interest in the property? If she did not contribute to the downpayment, and has not paid any of the mortgage, her interest is zero from an investment point of view. Her name on the title was for administrative convenience and legal reasons as discussed by the OP. The mother may not have had "beneficial ownership" in CRA's terms.

Even if the mother helped with the down payment you could probably claim it was a gift to the daughter at the time.

In any case, as others have suggested, it would probably be worthwhile transferring title now while Mom can still answer questions about her intent.

This is indeed the question. Beneficial ownership (for a real property) typically comes with risk/liability, possession/occupancy, entitlement to income from the property, etc. The fact that mom was a co-signer on the property is another factor leading towards beneficial ownership.

Here's the relevant Interpretation Bulletin from Revenue Canada on real property and beneficial ownership: http://www.cra-arc.gc.ca/E/pub/tp/it437r/it437r-e.pdf

I know that taking her off the title is a transfer/disposition of her interest. But what is the nature of that interest?

[carverman]

This is indeed the question. Beneficial ownership (for a real property) typically comes with risk/liability, possession/occupancy, entitlement to income from the property, etc. The fact that mom was a co-signer on the property is another factor leading towards beneficial ownership.

Here's the relevant Interpretation Bulletin from Revenue Canada on real property and beneficial ownership: http://www.cra-arc.gc.ca/E/pub/tp/it437r/it437r-e.pdf

I know that taking her off the title is a transfer/disposition of her interest. But what is the nature of that interest?

I saw that document earlier but didn't fully understand it.

<excerpt from that document>
As indicated in ¶ 1 above, the ownership requirement for the principal residence exemption contained in paragraph 54(g) can be met by the legal owner of the property.
This is so even where the legal owner, e.g., a trust, is not the beneficial owner. However, as discussed in the current version of IT-120, there are other requirements that
must be satisfied for a taxpayer to be able to claim the
principal residence exemption. There are special provisions
in the Act which make it possible for any personal trust,
including a spousal trust, to claim the principal residence
exemption if it disposes of the property. For more
information on these rules, see Form T1079, Designation of
a Property as a Principal Residence by a Personal Trust.