My question is: Canadian-specific
QUESTION: We purchased a townhouse, which our son & his children live in, a
couple of years ago. He paid part of the expenses only as his income was
too small to cover everything, and he was a stay at home parent caring for
his totally physically dependend son. Now we need to sell the townhouse,
and buy a mobile for them to live in as it is getting too expensive to keep
the townhouse. As we live in our own condo, how much capital gains tax will
be have to pay on the townhouse. I earn around $38,000 a year, while my
husband's taxable income is around $7,000 a year.
Any information you can give us would be greatly appreciated.
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david ingram replies:
If you bought for your son and put it in your name because he could not
qualify, then it is his property. Assuming he is paying everything he can as
in a constructive trust and is doing any repairs and painting and cutting
the lawn, etc, it would be easy to prove. In those circumstances, anything
you paid to help out would be a gift. The sale would be his sale and there
would be no capital gains tax.
If, on the other hand, you have treated it as a rental property and deducted
a loss on line 126 of your tax returns, the property would be yours for tax
purposes and any gain would be taxable.
I have to suggest though that keeping the townhouse makes far more sense
than selling it and buying a mobile home.
The townhouse will continue to increase in value over the years and the
mobile will not likely increase very much if anything. If it is yours, the
increase in value will likely be every bit as good as putting the same
amount of money into a savings plan. If it is your son's the increase will
accrue to him and the expenses of a townhouse will likely be less than a
mobile home and likely a better place to raise children.
It would likely make more sense to transfer the unit to son in either case
and then just help out in terms of total expenses.
You need to do a cash flow projection which involves everyone in the family
and includes everything including pensions, RRSP accounts, etc.
If you listen to the Fred Snyder Show on 600AM on Sunday mornings, he gives
a free "written" financial plan to callers to the show.
Answers to this and other similar questions can be obtained free on Air by
david ingram on the last Sunday of each month.
On the last Sunday at 9:00 AM on 600AM in Vancouver, I, david ingram will be
a guest on Fred Snyder of Dundee Wealth Managers' LIVE talk show called "ITS
YOUR MONEY"
Those outside of the Lower Mainland will be able to listen on the internet
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Call (604) 280-0600 to have your question answered. BC listeners can also
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------------------------------
the following question is possibly similar to your situation:
My question is: Canadian-specific
QUESTION: I bought my house in 1980 for 80,000 but in the early 80's due to
high interest rates got into financial problems. My father took over and
paid off the mortgage and put the property in his name to protect his money.
A few years later he added my name as joint owner. This house has always
been my principal residence and I have paid all taxes and expenses. When my
folks passed on two years ago I became the sole owner. My question to you .
Will this trigger a capital gains issue? The property is now worth 300,000
dollars. Thanks for your input.
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david ingram replies:
I would claim he house was always yours. You bought it and father took it
into his name in trust to keep it for you. You continued to pay the upkeep
and the taxes as an owner would in what is called a constructive trust.
Remember that term because if the CRA wanted to tax your father's estate on
the value of the house, you would need to claim and prove the constructive
trust to make your point.
Make sure you keep all the records of your paying the property taxes and any
receipts for upkeep, maintenance, repairs or other bills involving the
house.
If some of them have disappeared, start a 3-ring book now with the ones you
do have and then make up a sheet and make a hundred copies.
The sheet / form you will make will say something like the following:
------------------------------------------------
Date ______________________________
Repairs ___
Taxes _____
Improvements ________
Other ______________________
I remember spending $_______________ on or about ______________.
The payment was for ______________________________
and I paid it to: _________________________________________
_________________________________________
_________________________________________
by cash ___________ cheque _______________ Barter ______________ Other
______________________
Signed __________________
=========================================
If you make these up when you remember something you will sometimes be able
to go back to the business and get a receipt but more importantly, it will
document your constructive trust.
You can read about them at;
http://www.lawyerport.com/term/C/constructive-trust-627.asp
The following has Part I
http://shelburne.butterworths.co.uk/truststaxestates/articles/dataitem.asp?I
D=10312&tid=7
and Part II
http://shelburne.butterworths.co.uk/truststaxestates/articles/dataitem.asp?I
D=14223&tid=7
hope this helps
Answers to this and other similar questions can be obtained free on Air
every Sunday morning.
Every Sunday at 9:00 AM on 600AM in Vancouver, I, david ingram am a regular
guest on Fred Snyder of Dundee Wealth Managers' LIVE talk show called "ITS
YOUR MONEY"
Those outside of the Lower Mainland will be able to listen on the internet
at
www.600AM.com <http://www.600am.com/>
Call (604) 280-0600 to have your question answered. BC listeners can also
call 1-866-778-0600.
Callers to the show and questioners on this board can also attend the
Thursday Night seminars on finance and making your Canadian Mortgage
Interest deductible.
And for those in the Vancouver area, Fred is running an infomercial for 1/2
hour every night in October on Channel 10 television at "groooaaannnn" 1 AM
in the morning. It has a couple of useful concepts in it that can be
recorded to really get the idea.
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