My question is: Canadian-specific
QUESTION: My two sisters and I own a cottage in Ontario that was signed over to the three of us by our mother in 1987. Our mother died in 1991. We are listed as joint tenants on the deed and we are all Americans living in the USA. My one sister wants to buy us out. My other sister does not want to have to pay any capital gains tax (I'd rather not either, but..) We have been told by a Canadian lawyer that there is no way to get around the Capital Gains tax.
He said that a deed change can't even be filed unless tax forms are filed. Is this true? He also said that we could file a Canadian income tax return and end up getting approximately half of the capital gains tax back. Is that correct?
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david ingram replies:
Your sister and you will both owe Canadian Capital gains tax on the difference between the value in 1987 and the value the day you sell it to your sister.
Before you sell it, a Form T2062 should be filed for both of you. This will allow for a slightly reduced withholding of 25% of the expected profit as opposed to 25% of the gross sale price.
There is no automatic or even semi-automatic refund of 50% if and when you file the actual return.
Your lawyer could be telling you that if you do not file the T2062 (which would be a mistake with its $2,500 penalty), the purchaser (your sister) wouldhavf eto pay 25% of hte gorss sale price and remit it to the Canada revenue Agency.
If it turned out that the actual profit is exactly one half of the gross sales price, you would be entitled to approxinately 50% of the tax.
Glad to look after it for you. I have sales from Grand Cayman, Hong Kong, Chicago, Minneapolis and san Francisco on my desk right now.
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