# Transfer rental property to parents



## Y3LLoWF3LLoW (Sep 30, 2013)

My family bought a rental property years ago. For some reason at the time, we decided to put it 99% ownership to me and 1% in my dads name. 

Now I am making a considerable income and my dad holds a part time job. 

Is it possible to transfer the property back to him so that he can get the income or so he can sell it and be taxed under his tax bracket?

Thanks in advance


----------



## jerryhung (Mar 28, 2011)

Transferring is the easy part, talk to lawyers

It's tax on your disposition to CRA that's the annoying part
e.g. if house gained $100K, your capital gain share is $99K, 50% taxable at your marginal rate

btw, did you report Rental income under you or him over the years?


----------



## jaybee (Nov 28, 2014)

The question is...how has the tax situation looked?


----------



## Y3LLoWF3LLoW (Sep 30, 2013)

We've been reporting the rental income under me. Because we were advised by our accountant that'd it'd have to be that way. 

What about transfer to spouse? Would that be considered a sale?


----------



## Just a Guy (Mar 27, 2012)

http://www.cra-arc.gc.ca/tx/ndvdls/...rtng-ncm/lns101-170/127/trnsfrs/menu-eng.html

For the most part it looks like you'll be hit with capital gains.

I seem to recall a way that you could defer the gains by transferring into a corporation of which you are both shareholders...you may have even been able to transfer it out to the other person...but then, I never did go for these grey areas of accounting. I like my taxes to be more black and white.


----------



## Rusty O'Toole (Feb 1, 2012)

It may be possible to call it a gift between family members, a RE lawyer shouldknow.


----------



## Numbersman61 (Jan 26, 2015)

Rusty O'Toole said:


> It may be possible to call it a gift between family members, a RE lawyer shouldknow.


Nonsense. A RE lawyer has no expertise in tax matters.


----------



## Guban (Jul 5, 2011)

Rusty O'Toole said:


> It may be possible to call it a gift between family members, a RE lawyer shouldknow.


A RE lawyer did this to a friend of mine. Transferred a parents' house to the children who had principal residences of their own. Thought that there were no tax consequences between family members.


----------



## cashinstinct (Apr 4, 2009)

You can do whatever you want... and then CRA will audit you.


----------



## Westerly (Dec 26, 2010)

1. CRA would suggest that you reported it yourself because you are the beneficial owner, so no free pass.
2. AFAIK and keeping it simple, you cannot transfer a property with an accrued gain tax free - to anyone, unless you die, then to your spouse. If you have a principle residence exemption on it you can gift it to anyone you like, even your cat, income tax free. 
3. You can transfer it to a corp under section 85, but then the corp will pay on the passive income at top tax rates. This appears to be what you are trying to avoid. The corp will also then be scrutinized differently by the banks (might cost you $$ if you have / want a mortgage. 
4. Transferring it to your dad could cost your family $$$ now for transfer costs and later when considering a retirement home - depending on your province, this can be a very significant cost. 

Most of the time we are trying to get property down through the generations for tax purposes , not up.
You could sell it to your spouse, have her take out a mortgage (to pay for it) and then you use the proceeds to pay off personal debt (mortgage.) You don't even have to actually transfer it - you can hold it in trust. 

Any transfer has to be at FMV or there could be additional tax consequences. You should consult your accountant for this.

You could also manage your way through the interest rates with your spouse at some favorable outcome. Or, you could pay your father a reasonable fee for managing it / cutting lawns etc for you. This may be the most reasonable with the least costs associated. 


Good luck.


----------

