TaxCycle Home | Products | Pricing | Events | Documentation | Support | Blog

Principal residence - ownership


#1

Hi there, I have a tax question, which happen a lot in everyday life:

here the situation:

two siblings bought a condo together, and live in it together (their principle residence), and land title have both of their name. Few years after, one of the sibling get married (say sib1), and move out of the condo and live with spouse, at another house, which is the spouses principle residence. The other sibling (sib2) live in the condo the siblings bought together. After sib1 move out, they have an agreement that since sib1 no longer stay at the condo, sib2 will pay for all the expenses incur for the condo, eg, mortgage, repairs, etc. However, sib1 name wasn’t remove from the condo land title. Now sib2 sold the condo they original bought together, and the proceed 100% go to sib2, as sib2 is the one that pay for everything. As the condo is sib2 principle residence, there is no tax consequences, but need to be reported. The question is, is there tax consequences for sib1, because sib1 own the other half share according to the land title. But in reality, sib1 have nothing to do with the condo anymore every since sib1 moved out, in other word just legal ownership. Is there any capital gain for sib1? If there is, then need to fill out the T2091, and calculate the gain, right? If there no gain, what kind of document will be needed to proof that sib1 only legal ownership?

Thanks,


#2

You seem to have got hung up in some details.

On the date of marriage, Sib 1 disposed of her Principal residence interest (50% of FMV) and acquired same at FMV on that date as regular Capital property.

Get them to give you a written agreement of any Gifting that may or may not have occurred, and also the payment of expenses which constitutes Rent (which the Married Sib should report in the relevant years as rental income, with probably corresponding amounts as rental expenses).

Then, they BOTH sold their shares of the condo, and they should give you the written agreement as to the proportion of POD which is allocated to each. (Depending on how much, if any, Sib1 had gifted to Sib2, this is likely Beneficial ownership of 50/50)

Sib1 will of course have a Cap Gain on her investment property, on the increase in value from FMV at date of marriage to sate of sale - Sched 3 Capital Gains

If they have any additional legal dealings, they should provide you with the documentation (preferably notarized by a lawyer or notary).
Tax is not a “hearsay coffee-discussion allocation”, it is based on hard facts, preferably with verifiable evidence…

If they dont have proper documentation, they should get some drawn up, with the assistance of their lawyer and their CPA, recording each step.


#3

Thanks Joe.

It never a investment property… when the marriage sibling (sib1) move out, it became sib2 principle residence, and sib2 live in the condo until it is sold. The condo was never rented out. And when the condo was sold, sib2 get to keep all the proceed.

Nevertheless, what you saying is, sib1 shouldn’t have any capital gain even though sib1 name is on the land title. And I’m actually on that as well, because sib1 have no beneficially ownership, just legal. But the problem is, because of their relationship (blood related, and given that they came to Canada together, kinda tell how close they are), they never wrote an agreement (just verbally) that sib1 was gifting the property to sib2. Is it too late to do an written agreement now? Given that the gifting happen 30 years ago. Given no written agreement, how would sib1 prove that s/he only legal ownership, not beneficial ownership?


#4

No it did not - unless you have written documentation to PROVE that sib1 GAVE (MADE A GIFT) of her ENTIRE 50% share to sib 2 ON THE DATE OF HER MARRIAGE.

What I am saying is, sib1 DOES have a Capital gain, since her 50% share is her NON-PRINCIPAL RESIDENCE CAPITAL PROPERTY.

You started off the whole thread by saying that sib1 AND sib2 EACH had a 50% beneficial ownership since date of accquisition, - and so it remains. (“two siblings bought a condo together, and live in it together (their principle residence), and land title have both of their name.”)

  • sib1 got married 30 years ago?

They will need to visit a lawyer to draw up satisfactory documentation if dates are going to be messed around with - presumably that lawyer will be familiar with the Pecore case.

(Sorry for the capitals - probably I should have bolded instead) :frowning:


#5

Hi Joe,

Thanks for sharing no need to be sorry… capitals just mean it is important sentences… so I need to read twice to make sure :). But I read everything a few times anyways haha

No I do not have a written documentation to prove the gifting… as I explain, it is because of their relationship, so they never think it will get them into this kind of mess. Yes, sib1 got married 30 years ago, and now they both retired. And of course we listen to our clients, and take whatever they say as true, and I believe it is true. And base on what my client telling me, I believe no capital gain, because no beneficial ownership remain, but it was all verbal, no documentation. but my whole point on this is again (if you read my previous posting), I’m wondering if there other documents that can prove that she only legal ownership.

So the end result is: No written documentation to prove, and been so long, don’t think anybody willing to write up such a document and notarize it. Sib1 just need to pay the capital gain tax. Sad for the siblings, but luckily, sib2 did agree to pay the tax on behalf of sib1 on her gain.