# Property transfer question



## Mtlcouple (Jun 19, 2012)

I have a question about property transfers. 
My wife and I will be getting divorced within the next year. We are separated and on good terms. We have a few properties to split.
Obviously we will go see a notary and accountant but I just would like a heads up. 
We own two buildings jointly. We would like to each have one under our own names. 
I assume we can’t just simply sign the buildings over to one another? 
Does anyone know what the tax implications are?
Transfer tax, capital gains tax?
Is there an advantage that we were married or it is the same rules that would apply if we had just been partners?
Thank you


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## Beaver101 (Nov 14, 2011)

^ Hate to say this but your questions seem loaded inviting unsolicited (in the legal sense) advice from this forum. I think you're better off asking the licensed professionals that you have listed above to get the "proper (aka correct)" advice.


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## AltaRed (Jun 8, 2009)

There are protocols to follow in a Division of Assets within the family law fir your province. Generally all assets need to be declared and market values and a plan presented to the respective lawyers for fairness. An accountant can validate the work and present to the lawyers for endorsement in the Separation Agreement.

I believe it is only when the divorce is finalized in a court can titles and ownership be changed without tax consequences. Provinces and CRA have provisions to allow tax free transfers between divorcing couples.

Bottom line: professional advice is needed to do all this properly and at the right time.


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## Longtimeago (Aug 8, 2018)

Mtlcouple said:


> I have a question about property transfers.
> My wife and I will be getting divorced within the next year. We are separated and on good terms. We have a few properties to split.
> Obviously we will go see a notary and accountant but I just would like a heads up.
> We own two buildings jointly. We would like to each have one under our own names.
> ...


You are just asking for a heads up and realize you need to consult with the professionals as to exactly how to proceed. So to answer your question as asked, as a heads up I have no hesitation saying you will be able to achieve what you want to achieve with division of assets as long as you remain 'on good terms'.

I went through this some years ago and the only ones not agreeing were our lawyers. Both my ex and I had to tell them firmly, 'this is how we want it to be, we are not asking you for advice on how we should divide our assets, we are telling you how we will divide our assets and all you are being asked to do is make that happen.'

For example, let's say one wants the dog and the other wants a painting. The dog is worth what? Meanwhile the painting is worth $10k. It's not hard to imagine how 2 lawyers would argue over that. If one building you have is worth $Xk more than the other building, you can see how they might want to argue while you and your wife are quite willing to agree on who gets which building. So just remember who is in charge, you, not the lawyers and you may want to pre-warn your wife as to this possibility.


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## AltaRed (Jun 8, 2009)

Yes, but the lawyers need to present valuation fairness in the court application as part of their fiduciary duties. Hence the reason each lawyer will want to sure their client understands the fairness principle. Market valuations will be necessary for the RE properties, and cash adjustments used to balance differences. It is not hard to do in collaborative divorce.

My ex and I went through this in 2008 in Alberta using lawyers that subscribed to Collaborative Divorce, which by stated principles is designed not to be adversarial. https://collaborativepractice.ca/ This is by far the best approach for non-adversarial couples, and as I understand it, is a process that exists throughout Canada, though the specifics may vary a bit depending on provincial family law. In our case, there were no arguments and only a few questions asked by the lawyers of the financial accountant we co-hired to validate valuations.

The OP was primarily asking tax related questions so that is where I focused my initial response. To allow for tax free transfers (CRA and possibly land titles), certain processes need to be completed first.


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## Mortgage u/w (Feb 6, 2014)

If both buildings are rentals and are each assuming each other's 50% ownership, then yes, you will pay a capital gain on the 50% portion being sold as well as a transfer tax - whether you're a couple or not.
If one of the buildings is your family home, then there would be an exemption on capital gains but not the transfer tax. 

My advice: since you are both in good terms and not officially divorced yet, it may be easier to get this done through your Notary before getting divorced. If mortgages are on title, you will have to advise your lender for the title change and ensure you each qualify alone. Even though the split it done before, all assets will still be considered in your divorce settlement. As Longtimeago mentioned, as long as you are both on the same page and know how to split your assets, ensure you are both stern and getting it done your way and not the lawyers'.


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## AltaRed (Jun 8, 2009)

To my knowledge, there should not be cap gain taxes resulting from a Division of Assets from a divorce. ACB should be transferrable for equalization purposes on finalization of same. That is the way it is with capital market assets. My ex and I split many stocks and mutual funds to equalize in our Division of Assets. The OP needs to do some real tax relevant homework on this matter. Ask an appropriate tax accountant. Links such as
https://www.advisor.ca/tax/estate-planning/tax-implications-of-divorce-part-2/
https://www.canada.ca/en/revenue-ag...sfers-after-separation-divorce-annulment.html
http://www.cobbjones.ca/cj/article/transferring-property-on-marriage-breakdown/


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## twa2w (Mar 5, 2016)

AltaRed said:


> To my knowledge, there should not be cap gain taxes resulting from a Division of Assets from a divorce. ACB should be transferrable for equalization purposes on finalization of same. That is the way it is with capital market assets. My ex and I split many stocks and mutual funds to equalize in our Division of Assets. The OP needs to do some real tax relevant homework on this matter. Ask an appropriate tax accountant. Links such as
> https://www.advisor.ca/tax/estate-planning/tax-implications-of-divorce-part-2/
> https://www.canada.ca/en/revenue-ag...sfers-after-separation-divorce-annulment.html
> http://www.cobbjones.ca/cj/article/transferring-property-on-marriage-breakdown/


Yes assets are usually transferred without capital gains tax as AR points out. The trick in these cases is that the party receiving the property accepts the original cost base so this must be balanced out. Even RSP assets and TFSA assets can be transferred between spouses under a separation agreement without tax consequences.

The parties can split the assets the way they want but the rules in most provinces state that both parties must have independent legal advice. So while they can use one lawyer to set everything up and arrange the transfers, both parties must have independent legal advice. So if the lawyer who is doing all the work was retained by one of the parties to draw up the agreement and division of assets, the other party must obtain advice from another lawyer as to the fairness etc of that agreement. They can of course ignore that advice but they have to acknowledge they received the advice. This will make it very difficult to go back later and claim it was unfair or they didn't know what they were signing.

Separation of assets is a provincial matter and divorce is a federal matter. One does not necessarily rely on the other although most judges will want to ascertain that assets and custody issues were settled prior to the divorce decree but this does not always happen in order and one is not required for the other to occur.. And obviously support and custody orders are often amended as circumstances change - well after a divorce is final.


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## AltaRed (Jun 8, 2009)

As I mentioned previously, it seems like the OP and spouse are good candidates for Collaborative Divorce. By picking that route and picking lawyers that have committed to that methodology, saves a lot of potentially adversarial behavior.


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## Longtimeago (Aug 8, 2018)

AltaRed said:


> Yes, but the lawyers need to present valuation fairness in the court application as part of their fiduciary duties. Hence the reason each lawyer will want to sure their client understands the fairness principle. Market valuations will be necessary for the RE properties, and cash adjustments used to balance differences. It is not hard to do in collaborative divorce.
> 
> My ex and I went through this in 2008 in Alberta using lawyers that subscribed to Collaborative Divorce, which by stated principles is designed not to be adversarial. https://collaborativepractice.ca/ This is by far the best approach for non-adversarial couples, and as I understand it, is a process that exists throughout Canada, though the specifics may vary a bit depending on provincial family law. In our case, there were no arguments and only a few questions asked by the lawyers of the financial accountant we co-hired to validate valuations.
> 
> The OP was primarily asking tax related questions so that is where I focused my initial response. To allow for tax free transfers (CRA and possibly land titles), certain processes need to be completed first.


Well, my ex and I agreed on a division of assets that was not 50/50 AltaRed so there was certainly no 'valuation fairness'. We divided the assets with a Separation Agreement, prior to later actually divorcing. What's more, we continued to hold a property in common, at an unequal percentage ownership even after we eventually divorced. In the Separation Agreement, things like house ownership, artworks, vehicles, were all spelled out as going to one or the other or a percentage of in the case of the house. She kept a Mazda Miata, I kept a Jeep Cherokee for example, she kept all the artworks, I kept the wine cellar contents, the division of each of those was not equal in any instance, they were based on who wanted what, $ valuation was never even discussed once we told the lawyers we were not interested in discussing money value. The only item we came close to arguing over was a painting we both really liked but I as a gentleman, agreed to her having it.

The point is AltaRed that if either one of us had insisted on a 50/50 'valuation fairness', neither of us would have been happy with the end result. the Cherokee was worth more than the Miata for example but I wanted to Cherokee to be able to carry my bicycle inside it, she wanted the Miata because she was one of those people who love to drive a manual transmission around twisting roads at speed, different interests, different VALUES to the individual. FAIR is not always about money.

That's why I emphasized, 'if you remain on good terms', your 'collaborative' approach may avoid adversarial issues but it kinda assumes adverserial issues are likely if you don't adhere to 'valuation fairness'. If one of you is insisting on MONEY equality, then I'd say, you are not remaining on good terms.


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## AltaRed (Jun 8, 2009)

LTA, we also continued to own a joint investment property after divorce, we divided household goods based in preference, not value, and we remain on excellent terms, with me continuing to provide investment management advice when she asks for it.

My posts were specifically about financial assets such as pensions, bank and investment accounts and real estate, which I thought was obvious from my posts. True that some people argue about household goods but that typically does not cause an issue in Collaborative Divorce.

The point of this thread was about avoiding cap gains and land transfer taxes on investment real estate, not household goods.


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## Mtlcouple (Jun 19, 2012)

Thank you very much for all the great replies. I have been very busy and will read them all tonight


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## Mtlcouple (Jun 19, 2012)

Well altered, I hope you are right. 
In Quebec you have five free hours with a lawyer. After our first session, it was clear the road they were leading us down was not going to help us.
I know they are just doing their job but it clearly was understood by us as splashing some **** around.
Because as some of you have mentioned it is not just about money. 
From what I’m understanding we need to see a savvy tax accountant. The buildings have taken values and the taxes would be so high that we would simply just stay partners if we cannot do it.


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## AltaRed (Jun 8, 2009)

Am pretty confident you can transfer at ACB without tax consequences once a Division of Assets has been approved by the court.

Most tax accountants should be familiar with these processes. After all, some 40% of marriages end in divorce.


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