# options for valuing a summer cottage for capital gains purposes



## cunardpeters (Mar 19, 2013)

Are annual property tax assessments the only measure that can be used in determining capital gains on a summer cottage owned since the 1960s? How about a valuation by a realtor or property appraiser of what it would sell for? 

In our case, the actual selling value of the cottage is considerably less than the annual assessments, because there is a significant title dispute with the property that is not factored into the annual assessments, but would have to be disclosed to buyers.


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## iherald (Apr 18, 2009)

cunardpeters said:


> Are annual property tax assessments the only measure that can be used in determining capital gains on a summer cottage owned since the 1960s? How about a valuation by a realtor or property appraiser of what it would sell for?
> 
> In our case, the actual selling value of the cottage is considerably less than the annual assessments, because there is a significant title dispute with the property that is not factored into the annual assessments, but would have to be disclosed to buyers.


Capital gains is based upon what you actually sell the cottage for.


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## MoneyGal (Apr 24, 2009)

There are lots of situations in which a capital gains assessment is required and there's no actual sale. 

That said, it's a little unclear what is actually being contemplated here. Is the property changing hands via a sale? If it is a sale NOT between family members, you are likely to be able to use the actual sale price to calculate capital gains. If it is a deemed disposition, or any transaction involving family members, be cautious about deviating from the assessed value, and professional advice is probably warranted.


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## Cal (Jun 17, 2009)

My guess is that a formal letter stating the estimated market value as of a particular date (not sure on your situation) would be acceptable. The other party may request 3 appraisals from different RE offices, to nullify any high or low assessments, depending upon what they feel would be in your best interests.


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## Pennypincher (Dec 3, 2012)

From my experience, CRA often rejects Municipal property tax assessments as they are done using the EVA system. This isn't acceptable for income tax purposes, so the only actual way is by hiring an accredited property assessor in the case where CRA requires it to support whatever figure you are using. If you need to know the value of the property in 1967 or whatever, they can do that and put it in official writing for you. 

As for selling, just like Moneygirl said, you have to use what you sold it for. Income taxes is not about speculation but about actual dollar transactions that took place, and the money that went in or out of your pocket. It's pretty nice that you only have to include 50% of capital gains for income though.


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## MoneyGal (Apr 24, 2009)

Well, there are circumstances in which "what you sold it for" is not the reported value for tax purposes. Transactions must be at fair market value. "Fair market" implies non-arm's-length. So if you sell a property to a non-arm's-length family member for less than FMV, your deemed cost of disposition is FMV, not the actual sale price.


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## cunardpeters (Mar 19, 2013)

The property with title in dispute is not being sold, but one of the family members who owns part of it has died, so capital gains has to be calculated. The family hopes to someday establish clear title to the property, so will likely pay the capital gains based on the provincial tax assessment. In similar fashion, they have chosen not to appeal the annual tax assessment based on the title problem.


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