# legal expenses for adding spouse onto property title



## Transient

After getting married I added my wife's name on to the title of the house. The lawyer who did this for me told me to hang on to the receipt as it would qualify for a tax deduction when filing my taxes.

I've been reading and searching all over, but I can't find where I put this expense on my tax return. I'm using Studio Tax if that makes any difference.

If someone could please point me in the right direction, it would be greatly appreciated.

Thanks!


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## FrugalTrader

I don't see how this would qualify for a tax deduction, but perhaps other forum members would have another opinion.


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## stardancer

It doesn't qualify for a tax deduction as it is on a principal residence.


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## Racer

I don't know how to help you actually enter it into your tax forms, but I do know that the CRA allows you to deduct legal expenses incurred for the purposes of earning income. 

The reasoning goes like this: 
1. Any disposition of capital property presumptively triggers a capital gains. It looks like you are just adding your wife's name to the property, but you are actually 1) transferring out of your name and 2) transferring into your name and her name together.

2. Certain exemptions to the presumptive rule apply. One exemption is a tax-free rollover for this kind of transfer.

3. You can elect out of this tax-free rollover. If you elect out of the rollover, you would trigger a capital gain for the difference between your adjusted cost base of the property and the fair market value at the time of the transfer), and your wife would earn any future capital gains or business income gains in her own name without the spousal attribution rule applying. This is not what you are going to do, though, which means...

4. By not electing out of the rollover, you are therefore incurring legal expenses so as to earn future capital gains in your name (not your wife's), by way of the spousal attribution rule.​
Here are a couple of links for you: 

Income Tax Act allows deduction of legal fees incurred for the purpose of producing incomehttp://www.lawyersweekly.ca/index.php?section=article&articleid=443 
Tax letter explaining tax-free rollovershttp://www.newportgrp.com/news/2008/oct2008.pdf

I hope this information is helpful. As always, you should seek advice from a qualified tax professional, which I am not. 

Good luck.


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## Transient

That's strange, I guess she was mistaken then. Hmm, I sure hope she did the title change correctly! 

Oh well, thanks everyone for the responses!


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## MoneyGal

I'm no lawyer  but there's no way I'd put the principal residence exemption for my principal residence at risk by attempting to deduct what is probably a relatively trivial amount (relative to the potential value of the tax-free gain) of legal fees. 

In addition, legal fees related to buying, selling and transferring property are generally not deductible in any case, as they are a capital expense and usually get added to the adjusted cost base of the land or property.

The relevant CRA bulletin on deducting legal expenses is here. See section 14 on the non-deductibility of legal fees associated with capital transactions.


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## Cal

I am more curious as to why you paid to do that in the first place.

If you are married, whats yours is hers, and vice versa.

If you ever separated, the lawyers would recognize the property as both of yours anyways.

Were you changing the title of several properties for tax purposes?


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## Four Pillars

Cal said:


> I am more curious as to why you paid to do that in the first place.
> 
> If you are married, whats yours is hers, and vice versa.
> 
> If you ever separated, the lawyers would recognize the property as both of yours anyways.
> 
> Were you changing the title of several properties for tax purposes?


I did this as well.

I think (and my memory is a bit foggy) the two reasons were for estate purposes:

1) If I died, my wife would automatically own the property (no waiting).
2) Avoid probate fees.


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## OhGreatGuru

The estate reasons make the most sense.

_ Originally Posted by Cal View Post

If you are married, whats yours is hers, and vice versa._

True for the "matrimonial home" in most jurisdictions, regardless of whether or not one partner brought it into the marriage. But for other assets the division would apply only to value built up during the marriage in Ontario.


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## Transient

Cal said:


> I am more curious as to why you paid to do that in the first place.
> 
> If you are married, whats yours is hers, and vice versa.
> 
> If you ever separated, the lawyers would recognize the property as both of yours anyways.
> 
> Were you changing the title of several properties for tax purposes?


I did it on the advice of my bank for estate purposes as Four Pillars mentioned above. If I died then she'll continue to own the property. Although she'd end up owning it in the end anyway, I was told it would save her some hassle.

I also think there's a certain amount of satisfaction with knowing your name is on the title. Much like making that last car payment and then knowing it's yours.  

For the relatively small amount of money involved (~$350) I figured we might as well do it.


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## Racer

Transient said:


> That's strange, I guess she was mistaken then. Hmm, I sure hope she did the title change correctly!
> 
> Oh well, thanks everyone for the responses!


No need to worry. She did it perfectly well if you both ended up on title.  



MoneyGal said:


> I'm no lawyer  but there's no way I'd put the principal residence exemption for my principal residence at risk by attempting to deduct what is probably a relatively trivial amount (relative to the potential value of the tax-free gain) of legal fees.
> 
> In addition, legal fees related to buying, selling and transferring property are generally not deductible in any case, as they are a capital expense and usually get added to the adjusted cost base of the land or property.
> 
> The relevant CRA bulletin on deducting legal expenses is here. See section 14 on the non-deductibility of legal fees associated with capital transactions.


Thanks for the links. Everyone in that situation does steps # 1, 2, and 4. The claiming of a deduction wouldn't affect it. 

I am just working things out, learning as I go. Perhaps I should not test out theories on a public site. Then again, I am just a bumblebee.  

Hmm. I followed your link and am a bit confused. It says that you include the legals as part of calculating the ACB when calculating your capital gain. Does deduction mean something else, other than subtraction against that kind of gain/loss? 



Cal said:


> I am more curious as to why you paid to do that in the first place.
> 
> If you are married, whats yours is hers, and vice versa.
> 
> If you ever separated, the lawyers would recognize the property as both of yours anyways.
> 
> Were you changing the title of several properties for tax purposes?


Transferring the property into joint ownership means that if one person dies, the other takes 100% ownership immediately, without questions. No probate, no estate challenges, no issues with mortgage lenders or creditors with respect to the transfer of ownership. Overall, it's an incredibly cost-effective and reliable way to protect your loved one in the event of your death.


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## MoneyGal

Hey, Racer. I'm not totally sure I understand your question about the deducting legal expenses. 

What I wrote is what I know to be true and reflected in the circular to which I linked: when you have a legal expense related to the purchase, sale or transfer of property, it is a capital expense which affects the ACB, not a current expense which you enter on a schedule and claim in the current year. Make sense?

BTW: testing theories on public sites is how we learn from each other, n'est-ce pas?

Coming back to say that here is a purely pragmatic way to think about the mechanics of this issue: given that the legal cost incurred is a capital cost, not a current cost, it would be claimed when there is a capital gain or loss associated with a disposition of the property, whether deemed or actual. 

So what the OP would need to do to claim the cost is prepare the statement of capital gain/loss for the property at the time of disposition. 

Except the disposition of a principal residence is ipso facto non-taxable, and does not need to even be reported on a tax form. So in order to adjust the ACB by the amount of the legal costs, the OP would need to simultaneously declare the property and the disposition, and then complete both a capital gain/loss for the property (to establish the ACB including the legal costs), AND complete the schedule designating the property as a principal residence for all the years of ownership. 

You can't have it both ways. Either the property is not exempt from gains/losses, in which case the legal costs are added to the ACB and deducted from the gain/added to the loss; or the property is exempt from gains/losses and there's no ACB to calculate.


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## Racer

MG, You are exactly right. Please scratch my query from last night (mental note: don't talk tax after a couple of beers. I woke up bashful this morning when I remembered).

I re-read my links, and I think they actually refer to income-earning property -- not principal residences. That 4-step process is how I figured the reasoning would work when you want to deduct legal expenses relating to transferring income-earning property to your spouse.

I went back and edited out my reference to the principal residence and taxable income. 

Thanks for the clarification.


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## MoneyGal

No worries. I've publicly fessed up to mis-remembering and mis-stating things here lots. I'm often posting as I wake up in the morning or fall asleep at night, so I don't expect me or anyone else to be at the top of my game here.


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## Cal

I also think there's a certain amount of satisfaction with knowing your name is on the title. Much like making that last car payment and then knowing it's yours.  

For the relatively small amount of money involved (~$350) I figured we might as well do it.[/QUOTE]

Gotcha - that is forward thinking!


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## yyzvoyageur

Sorry for dragging up an old thread, but is there a way to add a spouse to a property title without getting a lawyer involved?


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## I'm Howard

We will be giving our Sons fairly large amount to be used for House Downpayment, but it will be an Interest Free Loan, if Spouse walks She will get what the House sells for LESS the loan.


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## Plugging Along

yyzvoyageur said:


> Sorry for dragging up an old thread, but is there a way to add a spouse to a property title without getting a lawyer involved?


I can only speak from an AB perspective, but you don't need a lawyer. You can go right to the registries and do it. Here they charge a % of the assessed value to make the change. 

However, for us, it wasn't much more to get a lawyer to do it. It was pretty standard, and it saved my parents alot of time.


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## fraser

I would be very careful about making the assumption that should you provide and interest free loan to a married child for purchase of a home, and the marriage subsequently ends, that you will be second in line after the mortgage holder.

I had a very interesting conversation with a tax accountant several months ago. She had just returned from a legal seminar dealing with this exact issue-in both legal marriage and common law situations. We asked specifically about this. It can be very tricky. Her strong advice to us (we are considering the same) was very much along the lines of securing legal advice AND placing a second mortgage on the property- if your loan is substantial. This would secure your next in line position in the event of relationship breakup or bankrupcy. This advice was based upon Alberta statutes. Other provinces may be different. She also said HELOC's are causing a fair amount of angst in these particular situations because they typically rank in place after the mortgage but before any other loans.


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