We've been told that we must pay capital gains tax on the sale of my mother's primary residence (after her death).
I thought inheritances were not included as income in Ontario, Canada.
david ingram replies: You asre correct. In general, if mom died and you sold the house two weeks or two months later, there would be no tax. However, there are two situations where capital gains tax wouold apply.
A. There is no tax on her principal residence up to the date of death. However, if she passed away two years ago and the house is now being sold and has gone up any amount at all, there will be capital gains tax on the increassed value.
B. Another possibility is that she also had a summer home which had increased in value more than her actual residence and the executor chose to claim the summer home as the tax free capital gain asset and pay tax on her actual residence. This situation could also apply where mom sold the cabin the year before she died and decided that the family home would be taxable for the same time period she claimed the cabin tax free.
Of course, 'A' applies to the cabin in this case as well and there would be tax to pay if there was an increase in value between death and the actual date of sale.
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