Subject: Principal Residence Expert: taxman at centa.com Date: Saturday February 10, 2007 Time: 11:18 PM -0500 QUESTION: Background: History: -We purchased an acreage for my mom. in July 2000. -We moved a house on to the property and completed it for her to live in over the next 6 months. -My mom moved into the house in 2001. Situation: -We did not purchase the property as an investment, we purchased it as her principal residence as she had lost her previous residence when a relationship she was in turned sour. -Mom has paid all taxes, all bills for the entire time she has been in the house and will until she dies or decides to sell and uses the proceeds to purchase something more suitable later in life. -We put all 3 names on the title in recognition that mom has not been the best with managing her finances, and relationships so it was also meant to protect her from herself. It is also meant to streamline probate, and estate issues when she does die. -Last year we purchased an investment property and my mother signed for the mortgage. In effect she gave us a loan (against her house) for the purpose of the investment, equivalent to the bank's mortgage rate. Tax Questions: -What is required to sustantiate mom's claim of this being her personal residence when it does come time to sell or she dies? Although we are legally on title, she is definitely the beneficial owner of the property. What if anything is required to support this. -If this is not supportable, what would be the best way to minimize tax exposure when we have to purchase a new home for her? -Would a signed document indicating that mom was the majority owner of the property be sufficient. If so is there a minimum amount that we can be designated to own vs her (ie we each own 5%, vs 90% for her?) -Are there special issues that arise out of mortgaging mom's place to finance our investment property (we all signed the mortgage papers)? If so should we have a signed agreement that documents the transaction, with mom being the intermediary in the transaction (do I need to do this before I file my taxes). deb (I was unable to figure out how to search the archives. If you can't address this question as part of your newsletter, I would like to be given an estimate for what you would charge me for a paid consultation on this issue. --------------------------------- david ingram replies: I hate to say it but you should have a consultation either in person or by conference call with mom so that everyone has their ducks in order. If mom has made all payments on the house, it is likely hers under what is called a constructive trust. I will let you google "Constructive Trust" for several examples. as for charges, Phone consultations are $400 for 15 minutes to 50 minutes (professional hour). Please note that GST is added if product remains in Canada or a phone consultation is in Canada. This is not intended to be definitive but in general I am quoting $800 to $2,400 for a dual country tax return. $800 would be one T4 slip one W2 slip one or two interest slips and you lived in one country only - no self employment or rentals or capital gains - you did not move into or out of the country in this year. $1,000 would be the same with one rental $1,200 would be the same with one business no rental $1,200 would be the minimum with a move in or out of the country. These are complicated because of the back and forth foreign tax credits. - The IRS says a foreign tax credit takes 1 hour and 53 minutes. $1,500 would be the minimum with a rental or two in the country you do not live in or a rental and a business and foreign tax credits no move in or out $2,400 would be all of the above and you moved in and out of the country. This is just a guideline for US / Canadian returns We will still prepare Canadian only (lives in Canada, no US connection period) with two or three slips and no capital gains, etc. for $150.00 up. With a Rental for $350 A Business for $350 - Rental and business likely $450 And an American only (lives in the US with no Canadian income or filing period) with about the same things in the same range with a little bit more if there is a state return. Moving in or out of the country or part year earnings in the US will ALWAYS be $800 and up. TDF 90-22.1 forms are $50 for the first and $25.00 each after that when part of a tax return. 8891 forms are generally $50.00 to $100.00 each. 18 RRSPs would be $900.00 - (maybe amalgamate a couple) Capital gains *sales) are likely $50.00 for the first and $20.00 each after that. Just a guideline not etched in stone. ===================== international non-resident cross border income tax help estate family trust assistance expert preparation & immigration consultant david ingram, income trusts experts on rentals mutual funds RRSP RESP IRA 401(K) & divorce preparer preparers consultants David Ingram's US / Canada Services US / Canada / Mexico tax, Immigration and working Visa Specialists US / Canada Real Estate Specialists My Home office is at: 4466 Prospect Road North Vancouver, BC, CANADA, V7N 3L7 Cell (604) 657-8451 - (604) 980-0321 Fax (604) 980-0325 Calls welcomed from 10 AM to 9 PM 7 days a week Vancouver (LA) time - (please do not fax or phone outside of those hours as this is a home office) email to taxman at centa.com <mailto:taxman at centa.com> www.centa.com <http://www.centa.com/> www.david-ingram.com <http://www.david-ingram.com/> Disclaimer: This question has been answered without detailed information or consultation and is to be regarded only as general comment. 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