# Tax Consequences with Removing Name from Title of Condo



## codster (May 13, 2016)

Hello;

I bought a Condo with my Brother 5 years ago. Both our names are on the Title of the Condo. During these 5 years it has been both of our Primary Residence. We are refinancing the mortgage and it will be beneficial if we can remove 1 of the names on the Title.

My question is, what are the tax consequences in doing so? Considering we are related (Brothers), we both lived in the Condo for the full time period, and we will both still live in the Condo after the Title change. Will the Principal Residence Exemption in Canada cover the Capital Gain taxes? Will we have to pay any taxes or do anything special on our income taxes if we remove a name from the Title? Or because it's our Primary Residence can we just ignore the transaction on our income tax? In removing the name from the title, I understand it will be deemed a "sale" or "gift", i.e. we aren't exchanging any money in removing the name from the title, but is it more beneficial if we "sell the residence for $1000" than "gifting the residence", does it matter?

We bought the apartment 5 years ago for $375k. The appraisal for the mortgage this year came to $500k (I do not think this is the FMV appraisal, just a mortgage/bank appraisal). The Canadian Property Tax Appraisal when we bought it was $390k in 2011, and this year it's $360k in 2016.


Any clarification would be appreciated.


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## AltaRed (Jun 8, 2009)

There is no capital gains tax for principal residences and no need to report it either, i.e. it is an exemption.

The bigger issue is Land Transfer Tax in the province in which you reside. Google it for your province and see what is exempted, if anything, for family transfers. Technically, you are changing ownership and any land transfer tax will be based on Fair Market Value, and that means an appraised value. The Fair Market Assessment used for municipal tax purposes is not a a valid Fair Market Value. If anything, the mortgage appraisal is the one to be used.


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## codster (May 13, 2016)

AltaRed said:


> There is no capital gains tax for principal residences and no need to report it either, i.e. it is an exemption.
> 
> The bigger issue is Land Transfer Tax in the province in which you reside. Google it for your province and see what is exempted, if anything, for family transfers. Technically, you are changing ownership and any land transfer tax will be based on Fair Market Value, and that means an appraised value. The Fair Market Assessment used for municipal tax purposes is not a valid Fair Market Value. If anything, the mortgage appraisal is the one to be used.


Thanks for your reply.

For the PTT, I live in BC. Googling the exception for Family Members for PTT shows below:
sbr.gov.bc.ca/documents_library/bulletins/PTT_005.pdf

It says Brothers/Sisters are NOT considered to be related individually... When we bought the apartment, it was our first home, so we had the PTT "First-Home Buyers Program" and didn't pay any PTT for the purchase.

If the property was in my name alone, and I transferred it to my brother, I understand I would have to pay PTT. But if we both bought the apartment (both names on title), and just 1 name is being taking off the title, the first person would have to pay PTT again (even though his name is already on the Title, and he paid the PTT 5 years ago for this property he has been living in for the last 5 years?) Do I have this correct? On a $500k home, that would be around $8k?


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## AltaRed (Jun 8, 2009)

I doubt the PTT would have to be paid on the full amount, see the section on Net Interest Passing


> If registered title to a property is held in joint tenancy, and one of the owners transfers
> their interest to a related individual, the ministry determines eligibility for the
> exemption based only on the partial interest being transferred (i.e. the net interest
> passing section).
> ...


In your case, at most, it would be 50%, since in your case A+B ------>to-----> A

It may well be that there is NO PTT due, but that would be a question for a PTT expert. I assume you and bro hold this property in Joint Tenancy and not Tenants in Common?


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## kcowan (Jul 1, 2010)

I would recommend that you seek an exemption. The law was written for you making a sale to your brother. This is not the case.


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## codster (May 13, 2016)

Thanks for all your help. Yea, I meant it would only be 50% for the PTT. Yes we are joint tenants (we only have 1 title with both our names on it). We'll talk with the lawyer when we attempt to change the names on the title. See if there are any fees and if so inquire about seeking an exception (if it's possible).

Thanks again for all your help.


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## marina628 (Dec 14, 2010)

i bought my partner's share of an investment property and in my case I had to pay land transfer tax on 50% of the mortgage value which was only $65,000 at the time.


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## twa2w (Mar 5, 2016)

It would appear you would not qualify for an exemption to PTT. 
www.sbr.gov.bc.ca › bulletins › ptt_003

What you are essentially doing is executing a quit claim deed to release your interest to your brother. PTT would be payable on your interest ie 50% assuming you are joint tenants, not tenants in common.
Actually is is your brother, the acquiring party, that is responsible for the PTT if my reading is correct.
The question is why you feel you need to do this when refinancing the mortgage. Is this a case of you having some bad crefit or having taken on other debt or obligations that may affect the debt servicing of the mortgage refi. There may be other ways around a scenario like that.
Cheers


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## carverman (Nov 8, 2010)

marina628 said:


> i bought my partner's share of an investment property and in my case I had to pay land transfer tax on 50% of the mortgage value which was only $65,000 at the time.


I think the OP is talking about a Principle residence where they both as related family members have lived for 5 years, not an investment property.

I had a similar case with my mother, who owned 50% of my house until recently. Due to her age and the fact that she never lived in my house, (she has her own principle residence in Toronto), she decided to get her name off title before her death.
My mother gifted her share to me. We did that through her lawyer and my lawyer, for the sum of $1 to make it legal.

No capital gains nor land transfer tax was applicable.


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## twa2w (Mar 5, 2016)

The rules in Ontario may be different than BC. In bc rules for parent to child are different than for siblings. Ot sure if that is the case in Ont. 
In Ontario, we used to transfer between spouses, or parent to child, for 'the sum of one dollar and natural love and affection ' and that term showed on the transfer docs( or something close). And as carverman stated, no land transfer tax.
Not sure what prov marina 626 is in but I assumed her partner was another investor, not her life partner. Not sure with an investment property if the distinction would make a difference. iirc, in the past a transfer in Ont between spouses, or parent child did not depend on the type of property. Land transfer tax being a provincial definition and prin residence being a CRA defintion.


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## carverman (Nov 8, 2010)

twa2w said:


> The rules in Ontario may be different than BC. In bc rules for parent to child are different than for siblings. Ot sure if that is the case in Ont.
> In Ontario, we used to transfer between spouses, or parent to child, for 'the sum of one dollar and natural love and affection ' and that term showed on the transfer docs( or something close). And as carverman stated, no land transfer tax.
> 
> 
> Not sure what prov marina 626 is in but I assumed her partner was another investor, not her life partner. Not sure with an investment property if the distinction would make a difference. iirc, in the past a transfer in Ont between spouses, or parent child did not depend on the type of property. Land transfer tax being a provincial definition and prin residence being a CRA defintion.


From this document (BC) it appears that brothers are NOT considered related and the PTT applies as the brother's share would be considered
FMV and considered sold if the title transfer goes through. There may be some other way to get around it, but this appears to be the law.



> The following are examples of people who are not considered to be a related individual:
>  your sister, brother, uncle, aunt, niece or nephew.
> This means, for example, that you are required to pay PTT if your brother or sister transfers a principal residence to you


Brothers not related? Now that IS a strange twist of BC law when it comes to possessions. :rolleyes2:

However..criteria 1-4 applies, in this case I'm just pointing out #1. The link has criteria 1-4. 

A property is considered to be a principal residence if the following four criteria are
met.
1. Before the transfer, *either you (the transferee) usually resided and used the property
as your home, or the person transferring the property to you (the transferor), usually
resided and used the property as his or her home. *

http://www.sbr.gov.bc.ca/documents_library/bulletins/ptt_005.pdf


This sounds like some legal mumbo-jumbo in case of a principle residence and a real estate lawyer may be able to hep.


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## Nerd Investor (Nov 3, 2015)

I can't comment on the PTT or land transfer tax issues, as I live in Ontario. 

But as for _income_ taxes, there shouldn't be anything to report/tax consequences. When contemplating income tax consequences, they generally look to beneficial ownership vs legal, so unless you are actually selling or gifting your half of the home to your brother (which does not appear to be the case) then I don't see this being a transaction for income tax purposes.


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## codster (May 13, 2016)

Thanks for all your help. Yea it seems to me that legally (since we are brothers and don't quality for the family exemption for primary residence) we will have to pay 50% of the PTT (probably on our current mortgage value of 322k). Unless as kcowan says, this law was made for Brothers selling their property to each other... which is not the case here, we may be able to Seek an Special Exception (something other than the family exception)? If that's possible? I'll talk with my real estate lawyer about it. Unless someone here knows better? Maybe under common-law? We are more common-law than most common-law relationships (we're twins, lived together all our lives, share all our bank accounts (joint), ect)... just no sleeping together. 

I am confident since it is both of our primary resistance no Capital Gains Tax or anything needed on our income tax will be necessary.



twa2w said:


> What you are essentially doing is executing a quit claim deed to release your interest to your brother. PTT would be payable on your interest ie 50% assuming you are joint tenants, not tenants in common.
> Actually is is your brother, the acquiring party, that is responsible for the PTT if my reading is correct.
> The question is why you feel you need to do this when refinancing the mortgage. Is this a case of you having some bad credit or having taken on other debt or obligations that may affect the debt servicing of the mortgage refi. There may be other ways around a scenario like that.
> Cheers


Yes, it was because the lender said it was too much to debt service with having him on the title for the mortgage refinancing. He just finished school, and with his income as $0, and his debt from school (StudentLoans/LOC/CC's), it was difficult having him on the title. His credit is good though (All R1/C1/M1 on his Credit Report) just a lot of it. With just the working brother on the title it was easy to get the refinance quote from the lender though. But need to remove a name from the title. (It's funny, because 5 years ago (when he was in school) we didn't even wanna put both of us on the title, so we could apply for a 2nd home owner tax credit if we bought a second house, but the lender wanted both of us on the title, so we did it... now they don't want both of us). 

Thanks again for all your guys input.


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