PR applicant married to Canadian wants to sell condo lived in for two years

My question is: Canadian-specific


I have a question concerning the capital gains tax on a condo property my wife and I have lived in for the past 2 years.
Now I'm currently not a Canadian, but am awaiting my landed immigrant status. My wife is a Canadian citizen but her name is not on the title of the condo.
If we had to sell our property, what percentage taxes am I looking to pay? It seems unclear on what category we fit into. Would it be wiser to add my wife's name to the title, would that lower the taxes we'd have to pay? Thank you.

david ingran replies:

Ozzie Jurock (the world's best real estate site for Canadians at passed this on to me to answer for you.

It is a combination of immigration and tax question which is likely answered by Judge Teskey's decision in the Dennis Lee court case which I shall reproduce later on because its ruling is  used as a template for taxing people in close cases.

The Good news is that if you have been married to your wife and living in Canada all of the time for the two years you have owned the condo, it is tax free to you as a taxable resident of Canada.

The bad news is that if the Condo is tax free, then you are taxable in Canada on your world income.  My bet is that you did NOT file a Canadian tax return reporting world income during that time.

If you were in Canada for the two years, you might have had another former residence property in another country.  If that is the case, you have to decide which one you want to be your principal residence.

You should make sure to file your 2005, 2006 and 2007 Canadian returns to report your world income. 

Putting the house in your wife's name does nothing for you because  you are taxable on disposal to your wife or any other person if you are a non-resident. 

However, after reading the Dennis Lee case, I think you will agree that you are a resident of Canada unless you have spent most of your time out of the country in your home country and only married last month and started the immigration process last week.   In which case you would be taxable at about 12 to 22% on the profit, depending upon the province.  (12% on profits up to $70,000, 22% on profits over $220,000 with 3 or 5 levels in between depending on the province.)

In 1989, Denis Lee won part but lost most of his claim for non-resident status. He was a British Subject who worked on offshore oil rigs. He maintained a room at his parents house in England and held a mortgage on his ex-wife's house in England. For the years 1981, 82 and 83 he did not pay income tax anywhere. in 1981 he married a Canadian and she bought a house in Canada in June of 1981. On September 13, 1981, he guaranteed her mortgage at the bank and swore an affidavit that he was "not" a non-resident of Canada. [As I have said in the capital gains section of this book, bank documents will get you every time.] During this time he had a Royal Bank account in Canada and the Caribbean but no Canadian driver's licences or club memberships, etc.

Judge Teskey said:

"The question of residency is one of fact and depends on the specific facts of each case. The following is a list of some of the indicia relevant in determining whether an individual is resident in Canada for Canadian income tax purposes. It should be noted that no one of any group of two or three items will in themselves establish that the individual is resident in Canada. However, a number of the following factors considered together could establish that the individual is a resident of Canada for Canadian income tax purposes":

  • - past and present habits of life;

  • - regularity and length of visits in the jurisdiction asserting residence;

  • - ties within the jurisdiction;

  • - ties elsewhere;

  • - permanence or otherwise of purposes of stay;

  • - ownership of a dwelling in Canada or rental of a dwelling on a long-term basis (for example, a lease of one or more years);

  • - residence of spouse, children and other dependent family members in a dwelling maintained by the individual in Canada;

  • - memberships with Canadian churches, or synagogues, recreational and social clubs, unions and professional organizations (left out mosques);

  • - registration and maintenance of automobiles, boats and airplanes in Canada;

  • - holding credit cards issued by Canadian financial institutions and other commercial entities including stores, car rental agencies, etc.;

  • - local newspaper subscriptions sent to a Canadian address;

  • - rental of Canadian safety deposit box or post office box;

  • - subscriptions for life or general insurance including health insurance through a Canadian insurance company;

  • - mailing address in Canada;

  • - telephone listing in Canada;

  • - stationery including business cards showing a Canadian address;

  • - magazine and other periodical subscriptions sent to a Canadian address;

  • - Canadian bank accounts other than a non-resident account;

  • - active securities accounts with Canadian brokers;

  • - Canadian drivers licence;

  • - membership in a Canadian pension plan;

  • - holding directorships of Canadian corporations;

  • - membership in Canadian partnerships;

  • - frequent visits to Canada for social or business purposes;

  • - burial plot in Canada;

  • - legal documentation indicating Canadian residence;

  • - filing a Canadian income tax return as a Canadian resident;

  • - ownership of a Canadian vacation property;

  • - active involvement with business activities in Canada;

  • - employment in Canada;

  • - maintenance or storage in Canada of personal belongings including clothing, furniture, family pets, etc.;

  • - obtaining landed immigrant status or appropriate work permits in Canada;

  • - severing substantially all ties with former country of residence.

"The Appellant claims that he did not want to be a resident of Canada during the years in question. Intention or free choice is an essential element in domicile, but is  entirely absent in residence."

Even though Dennis Lee was denied residency by immigration until 1985 (his passport was stamped and limited the number of days he could stay in the country) and he did not purchase a car until 1984, or get a drivers licence until 1985, Judge Teskey ruled that he was a non-resident until September 13, 1981 (the day he guaranteed the mortgage and signed the bank guarantee) and a resident thereafter.

My point is made. Residency for "TAX PURPOSES" has nothing to do with legal presence in the country claiming the tax. It is a question of fact. My thanks to Judge Teskey for an excellent list. The italics are mine and refer to the items which I usually see people trying to "hold on to" after they leave and are trying to become non-residents. No single item will make you a resident, but there is a point where the preponderance of "numbers" leap out and say, "He / She is a resident of Canada, no matter what he / she says." 

The case above is not unusual in any way. It is a fairly typical situation in my office.