# Tax Questions on an out of Province House



## onestring (Jul 12, 2015)

Hi everyone, I'm new to the forum. Wish I would have found this earlier.

I inherited an older home from a parent in another province and have a few questions:
1. As far as selling a house, do the tax laws of both provinces intertwine, or does the Province where it resides take precedence? My main concern is capital gains which I think is federal. 

2. The house is located in a small town where older homes can be on the market for years (therefore prices are cheap), if I sell the house for less than the provincial tax assessment, do I have to pay any capital gains? I guess I should ask if I need an independent assessment on the house? From what I gather, most assessments come in allot less the the provincial tax rate.

3. I inherited the house in 2014; the property tax rate went up in 2015 (about $6000). If I sell the house now, would $6000 be considered a capital gain (even if the house is sold cheap)?

Thanks for any help!

Paul


----------



## onestring (Jul 12, 2015)

Sorry, I should have said the Provincial tax assessment went up about $6000, not tax rate


----------



## Spudd (Oct 11, 2011)

The capital gain will be whatever you actually sell the house for minus the value of the house at the time you inherited it. I guess you will have to use the tax assessment as the value of the house since that's likely the best you have. Or you could ask your realtor what they think the house would have been worth at the time based on comparable sales.


----------



## OhGreatGuru (May 24, 2009)

To answer your first question, the applicable income tax is in your province of residence. The fact that the asset is located elsewhere is non-germane. Capital gains are taxed by both federal and provincial governments.


----------



## onestring (Jul 12, 2015)

Thank you Spudd!

It's possible that I may be selling it to a relative who lives in the area, so if that's the case I may not hire a real estate agent; just a lawyer.
The price it will sell for (whether relative or not) will be much less than this year or last years Provincial tax assessment.
So does that mean the capital gains will be zero?

The house was a primary residence of my parent, right now nobody is living in it.

thanks again,

Paul


----------



## onestring (Jul 12, 2015)

@ohgreatguru
Thanks for the quick answer! 
That's interesting, but makes sense since I'll be filing in my own Province. 
Right now I'm paying "double" property taxes because I live outside of the province the house resides, so I thought maybe capital gains may be affected also. Glad to hear they're not.

thanks,

Paul


----------



## Spudd (Oct 11, 2011)

onestring said:


> Thank you Spudd!
> 
> It's possible that I may be selling it to a relative who lives in the area, so if that's the case I may not hire a real estate agent; just a lawyer.
> The price it will sell for (whether relative or not) will be much less than this year or last years Provincial tax assessment.
> ...


Sorry, I'm not a pro - this is out of my depth! I'm not sure if CRA would accept the tax assessment as proof of the value a year ago - my gut says no, but hopefully someone who knows more will come along and chime in.


----------



## onestring (Jul 12, 2015)

Thanks Spudd!
If the house sells, I may hire an accountant to help out with my 2015 taxes.
Like I mentioned above, wish I would have discovered this forum earlier. That way I would have had the house assessed as soon as I inherited it.

Paul


----------



## OhGreatGuru (May 24, 2009)

You should probably talk to an accountant or tax advisor. If you are selling to a relative, this is a "non-arms-length" sale, and CRA may not accept your selling price as being Fair Market Value.

PS. If the will was probated, a value for the house should have been declared for probate court. In which case, ask the executor(s) for documentation.


----------



## AltaRed (Jun 8, 2009)

OhGreatGuru said:


> PS. If the will was probated, a value for the house should have been declared for probate court. In which case, ask the executor(s) for documentation.


Bingo! If the executor was doing the proper thing, it would have been appraised by a legitimate appraiser. To my knowledge, most, if not all, provinces require an estate to go through probate to sell (change title) on real property. Municipal tax assessments are generally not accepted by the CRA anyway (nor a realtor's Market Assessment).


----------



## onestring (Jul 12, 2015)

Thanks for the replies!
Both good suggestions, I wish I would have talked to an accountant/tax advisor last year (this stuff is all new to me, I rent, never purchased a house).

There was no probate involved, the house had a "deed of living interest" done a long time ago (into my name). I just had to provide a death certificate to "officially" change everything into my name.

I'm going to look into having an independent assessment done. I hope the deed of living interest doesn't bring up any hidden problems I'm unaware of.

thanks for the help!


----------

