# Need help....please



## Dhlwtu (Mar 19, 2019)

My mom owns multiple homes in GTA. She lives in one, I live in another with my family and my brother and his family live in another home which all have my mom on title as soul owner.

This is where I need help! My mom is not well and wants to leave the homes we live in with our families to us. What is the best way to do this to minimize any taxes that may need to be paid to government? Notice I didn't say "avoid" taxes just minimize and possibly pay nothing at all?? Should she add us to title? Who should we speak with? If you want to refer someone who specializes in this area, I would be more then happy to take a referral.

Thx in advance 🙂


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## OnlyMyOpinion (Sep 1, 2013)

No way to minimize that I'm aware of.
When she tranfers title to a family member of a property that's not her principle residence, she will report any capital gains she has made between current fair market value and purchase price. That fmv will establish your value for the property.
Sounds like she had poor guidance in buying these properties. CRA implemented the need to report property sales in more detail a few years ago.
She might consider spreading the transfers over a few years to spread out the gains.


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## lonewolf :) (Sep 13, 2016)

OnlyMyOpinion said:


> When she tranfers title to a family member of a property that's not her principle residence, she will report any capital gains she has made between current fair market value and purchase price.
> 
> If that is the case I would hold off transferring to @ least 2022 as real estate prices fall.


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

You should ask a good accountant or real estate lawyer about this. If it is her principal residence she does not have to pay tax on any gains. Before 2016 she didn't even have to report it. You have to live in a house for a year to claim it as your principal residence. Details here.https://www.canada.ca/en/revenue-ag...ale-your-principal-residence-individuals.html

Years ago while researching properties for sale at the local registry office I came across one where no selling price was given. In place of the price it said "natural love and affection". The transfer was a gift from a mother to her son. Apparently this is legal, or was. I have only seen this once.

So, ask a real estate lawyer. He or she will help you minimize taxes and more important, make sure everything you do is legal and air tight. This may not seem important now but if your mother passes away, and some relative tries to claim undue influence or something, you want to be sure everything is above board and legal, and there is no question about your mother not having sound legal advice.


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## Btowngirl (Mar 4, 2019)

The previous owner of our house purchased the home from her mother for $1, this was in the financial records of our house. I thought it was strange at the time, but I guess I know why today.


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## Dhlwtu (Mar 19, 2019)

Hi everyone. Thank you for all your responses. Please keep them coming. The more information I can gather from this post the better.


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## Dhlwtu (Mar 19, 2019)

Knowledge is power 🙂


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## AltaRed (Jun 8, 2009)

Regardless of how the sale was structured, and what funds actually changed hands, I see nothing on the net that would suggest the 'selling' or 'gifting' cost of an investment property for CRA income taxation purposes is anything other than fair market value. Thus, Momma is going to have to pay capital gains taxes and the buyers will have to pay land transfer taxes (some provinces may have allowances/exemptions for family transfers).


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## Just a Guy (Mar 27, 2012)

One of the best ways to pass on real estate is to get a term life insurance policy to cover the taxes. Have the heirs pay the policy.


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## james4beach (Nov 15, 2012)

Remember too that these massive gains on the real estate properties are good news. There are taxes to pay because the assets went up dramatically in value! This is a far better situation than the reverse, which is falling real estate values and loss of wealth. When there are gains on an asset, you have to pay taxes... this is natural. The taxes are only a portion of the value and even after paying them, it's a net wealth gain (not loss).

She owns multiple properties. If she bought them at a much lower price, she (and the family) have become fabulously wealthy as a result of this. Just pointing out, this is a good situation.


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## humble_pie (Jun 7, 2009)

if the mother owns multiple RE properties in toronto, she undoubtedly has an accountant to help with the administration & surely would have discussed the legacy situation with the accountant.

the OP might possibly have received the bad news already from the accountant, which is that all properties other than the mother's personal residence are investment properties subject to capital gains upon disposition.

there are 2 good suggestions in this thread: 1) consider making over one property each year in order to distribute capital gains across a number of years. Presumably the mother would commence with the 2 properties occupied by her adult children.

also 2) if possible, buy a term life insurance policy whose premiums would be paid by the heirs. This would help pay taxes if unfortunate circumstances came about & a number of the properties were subject to capital gains tax in the same year.


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## Dhlwtu (Mar 19, 2019)

Hi everyone, OP here. 

Just to give you all a little more info. My mom lives in one house and myself and my 2 brothers (all adults) live in the 3 other homes. Not sure if that makes a difference or helps at all?


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## humble_pie (Jun 7, 2009)

Dhlwtu said:


> Hi everyone, OP here.
> 
> Just to give you all a little more info. My mom lives in one house and myself and my 2 brothers (all adults) live in the 3 other homes. Not sure if that makes a difference or helps at all?



oh dear. This could get a bit challenging. Has the mother been charging rent? then the question i don't really want to ask ... goes something like has she been reporting the rental payments ... because if so, would likely have an accountant to help her manage the business ... but perhaps you & sibs have all been living in your respective houses in blissful coop style ... no rent ... in you mama's eyes it's the same as if kids were still at home because they're all under her roofs

PS perhaps it would be best not to reply further to above point. Upthread someone has recommended finding a good accountant. Perhaps now is the time to find that personnage.


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## OnlyMyOpinion (Sep 1, 2013)

Dhlwtu, the living situation as you describe does not make a difference.

Humble summarized your next steps - sit down with a good accountant to determine the best path forward, including the possibility of a term life policy to cover estate tax liability.

Based on what you have described, if your Mom was to pass away, that would 'crystalize' the gains she has made in real estate that is in her name. Those gains (except her principal property) are taxable. Her estate will need to have funds avaialable to pay those taxes. Are those funds available now or would you sell her house, or one of the others, etc.

Simply signing over a (non-principal) property or leaving it to a child in her will would not prevent those gains or the tax that would be due by her estate.


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## AltaRed (Jun 8, 2009)

I doubt a term life policy would be possible at this stage of mama's health. It is likely far too late for anything that will remotely affordable. Best suggestion so far is crystallizing gains, one house per year me thinks, and depending on the cap gains taxes, maybe there should be some family sharing of the burden.... depending on what has been queried with respect to rental income, market rate or not.


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## OnlyMyOpinion (Sep 1, 2013)

AR, you are probably right re/ insurance at this point.
With a full understanding of her situation there may be a solution that is not too onerous. Perhaps selling the principal resdidence (which will not incur a tax liability) and using its proceeds to cover the tax liability from the other properties for example.

It sounds like a truly unfortunate situation. I could imagine for example, someone immigrating to Canada, working hard, saving, looking after your children by buying a house for them to live in, etc. The sad irony is that you could gift and/or buy a house for your children *with it in their name*, as their principal residence and not have the problem described. But oftentimes it seems prudent to keep things in your name if the children are still young, have a partner, etc.

Hopefully things will work out for Dhlwtu's family.

Added: the accountant might be able to suggest setting up a 5yr capital gains reserve to transfer full ownership over time and allow the gains to be spread over time.


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## AltaRed (Jun 8, 2009)

OnlyMyOpinion said:


> It sounds like a truly unfortunate situation. I could imagine for example, someone immigrating to Canada, working hard, saving, looking after your children by buying a house for them to live in, etc. The sad irony is that you could gift and/or buy a house for your children *with it in their name*, as their principal residence and not have the problem described. But oftentimes it seems prudent to keep things in your name if the children are still young, have a partner, etc.


Many years ago, my wife and I faced this situation as well. Before leaving on an ex-pat assignment for multiple years, we wanted to keep a foot in RE so we bought a townhouse and planted our 2 adult children in it at "low rent", essentially break even with 'all in' operating costs. We knew we would be exposed to cap gains as an investment property and the option was to put title in their names as a principal residence. But we chose not too for those reasons and more. Ultimately, we sold the townhouse a few years after returning to Canada, suffering the cap gains taxes that came with that decision. Still the right decision though to not do business with family. Having to pay cap gains taxes is not a bad problem to have.


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## ian (Jun 18, 2016)

I really suggest that you seek out some professional advice in how best for your mother to structure, time, and accomplish the transfers. It will be money well spent. The very last thing you want is a CRA audit two or three years after the transfer. Especially if it results in a re-assessment that is not in your mother's favour.


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## AltaRed (Jun 8, 2009)

ian said:


> I really suggest that you seek out some professional advice in how best for your mother to structure, time, and accomplish the transfers. *It will be money well spent.* The very last thing you want is a CRA audit two or three years after the transfer. Especially if it results in a re-assessment that is not in your mother's favour.


Totally agree.


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## Dhlwtu (Mar 19, 2019)

humble_pie said:


> Dhlwtu said:
> 
> 
> > Hi everyone, OP here.
> ...




We have never paid my mom rent. We just covered the mortgage payments, taxes and cost associated with the property we each live in.


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## AltaRed (Jun 8, 2009)

Dhlwtu said:


> We have never paid my mom rent. We just covered the mortgage payments, taxes and cost associated with the property we each live in.


That suggests to me there may have been no income/expense associated with any of these 3 properties on her tax returns, since I assume revenue-expense = zero. And no capital upgrades, and no CCA declared, etc. Just a guess on my part.

Which is probably legitimate since nothing was owing too, or being claimed from, CRA. Clearly though, there will be cap gains taxes to be paid if title is transferred.


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## OnlyMyOpinion (Sep 1, 2013)

I have no idea whether there is any possibility of convincing the CRA that the house was yours - except on title - based on solid bank records showing you have always paid the monthly mortgage, utilities, annual property taxes, that it has always been your principal residence, etc.
I doubt it, but again a good tax accountant should be able to assess that.


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## marina628 (Dec 14, 2010)

your mom has 4 homes and managed to get mortgages on all of them in her own name without rental income that is impressive,maybe this is the time to get your own mortgages payMom with the proceeds so she can file and pay her capital gains while she is still living...


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## AltaRed (Jun 8, 2009)

marina628 said:


> your mom has 4 homes and managed to get mortgages on all of them in her own name without rental income that is impressive,maybe this is the time to get your own mortgages payMom with the proceeds so she can file and pay her capital gains while she is still living...


I had been thinking how that could be........


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## Beaver101 (Nov 14, 2011)

^ Rich parents? Rich hubby? Lottery? Regardless mom is in control of the $$$ and finances and hard to believe she doesn't have an accountant or a lawyer first.


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## kcowan (Jul 1, 2010)

I remember when my Brother and I advised my Dad to take to one-time $150k capital gain exemption on his cottage. We said there was no downside. Then he advised us that all his senior's benefits were clawed back that year. We apologized because we had no awareness of the total impact. I suspect many accountants would be unaware also. Tread softly unless you are doing her taxes.


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## Just a Guy (Mar 27, 2012)

Yeah, it’s probably better to talk to a financial planner who looks at the entire picture. They look at insurance, mortgages, taxes, wills, investments, business succession, etc. An entire picture look. Unlike accountants and lawyers who only look at part of the picture. Mine was just telling me how he saved one client 800k in taxes, which would have happened had they followed the accountants advice.


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## james4beach (Nov 15, 2012)

kcowan said:


> I remember when my Brother and I advised my Dad to take to one-time $150k capital gain exemption on his cottage. We said there was no downside. Then he advised us that all his senior's benefits were clawed back that year. We apologized because we had no awareness of the total impact. I suspect many accountants would be unaware also. *Tread softly unless you are doing her taxes*.


Really good point


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## Dhlwtu (Mar 19, 2019)

Just a Guy said:


> Yeah, it’s probably better to talk to a financial planner who looks at the entire picture. They look at insurance, mortgages, taxes, wills, investments, business succession, etc. An entire picture look. Unlike accountants and lawyers who only look at part of the picture. Mine was just telling me how he saved one client 800k in taxes, which would have happened had they followed the accountants advice.


We honestly wouldn't even know where to begin to start looking for financial planner. I know the internet/Google is an option but I'd much rather have a referral. The best advertising in my opinion is word of mouth. 

Would you be able to private message me his contract info?


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