----- Original Message -----
Sent: Monday, July 14, 2008 11:18 PM
Subject: CONSTRUCTIVE TRUST - david ingram expert US CANADA cross border non-resident income tax help and preparation by five tax experts with years of experience with Canadian and American and Mexican income tax

QUESTION: I live in Quebec, Canada.  I currently own my parents' home which they purchased.  Big mistake because 
I own another home which i claim as personal residence.  I would like to transfer the house in their name so they can 
claim personal residence.  Are there any tax implications if I make a transfer?  i.e deemed disposition on the transfer?
david ingram replies:

This older series of questions may help!


QUESTION: My brother transferred his house under my name 10 years ago and no money was ever involved in the transfer.  My dad currently live in this house and there is no rental income.  Since this house is not my primary residence, if I sold this house would this situation be considered capital gain?

david ingram replies:

It depends upon how and why. If the house was your dad's first and he
transferred it to your brother and your brother transferred it to you
and you both think of it as dad's house, and dad has made all the
repairs and paid all the expenses for taxes, etc., it may be your dad's
house under what is called a constructive trust.  

If your brother transferred his house to you because he owed you money
and your dad moved in last year, its sale is tax able as a capital gain.

The actuality may be somewhere in between.


QUESTION: Me and my husband own a second house, title and mortgage is in our names. My mother lives there for free, thus we do not declare any rental income. We want to sell the house. What's the best way to pay less tax or avoid it? Do I have to pay tax even if it's my mom's primary residence? Can I transfer a title in her name, she sells it as her primary residence and pays no tax?

david ingram replies;

This is the kind of income tax help I like giving because it deals with
family matters and expert family matter income tax help is really hard
to find. 

If the house was yours, bought and paid for by you and mother did not
pay anything towards its upkeep or its purchase, then, any profit on
this second residence is taxable to you.

On the other hand if mom sold another property and put her money into
this second residence which was registered in your name for estate
purposes and mom paid the mortgage, hydro, gas and repairs, etc., then
it is your mother's house and you only held it in trust for her.  She
had a constructive trust as the owner of the property and it would be
tax free.

Your situation may be somewhere in between.  The problem is that for
some reason or other few lawyers and tax people understand what a
constructive trust is. Your mom, for instance, may not have had enough
to buy the place you wanted so you and your husband ponied up more and
rather than loan her the money, put it in your name to protect your
interest from others.

In general, a constructive house is formed when a person who does not
own a property (car, boat, mobile home, house, condo) treats it as
their own by paying all the bills and doing all the maintenance, etc,
as if it was their own.

If you put up a lot of money and mom put up half and you put it in your
name to protect your money from the possibility that mom might die and
you were trying to keep 'your' money from your siblings, it was likely
your mother's and tax free.

If on the other hand, you and your husband are clearly getting all the
money when the house is sold, you and your husband  will owe capital
gains tax on the sale.

hope this helps.

And of course, when it comes time to do the return for the sale, you
know where we are.



This applies in the US or Canada.


My father is a widower and added my sister and I on title to his house
which is his principle residence. He did this in 2003 and informed us
of it after the fact. He did this to save on the future probate fees
and no money exchanged hands. His house has considerably increased in
value in 5 years. If my sister and I wanted our names taken off the
title now, will we be subject to capital gains on our 2/3 portion from
2003 to 2008?


david ingram replies:

If your name was only on the title for probate purposes and neither you
nor your sister has listed 'your' shares of the house as an asset or
used it as leverage to borrow money or continue other financing, AND
your father has continued to pay all expenses, etc involving the house,
then I have no problem accepting that you were just holding the share
in trust for your father.

In that case, there should not be any tax liability if you were to take
your names off the title.

However, if either of you are married, your spouses may have other
ideas and try and claim the putative value of 'your' share of the house
in a future divorce action and claim that you took your names off the
title to circumvent BC's Family Relations Act.

When anyone wants to do this, they should have a side agreement that
accepts that the transfer was done for PROBATE purposes and that the
children acknowledge that until the parent's demise, the child will not
make any claims against the house, will not pledge their interest as
security, and return the property to the parent upon request.  At the
same time, any spouse of the child should sign the same document and
acknowledge that they have no claim against the property while the
parent is alive.


I appreciate all I learn reading your emails.
Mom is still thriving in her 87th year. My brother and I are executors.
Is there any significant advantage in us being registered on the title of her condo here in British Columbia?
I had forwarded the following email to my brother, but since B.C. does not have estate taxes, he is asking where the advantage might be...
david ingram replies:

BC does have Probate fees though and avoiding probate fees can be worth significant dollars
The BC rates are as follows:

2  (1)  In addition to any fees payable under the Rules of Court to commence a proceeding to obtain the issue of a grant or a resealing and to any fees payable under the Rules of Court to file documents within that proceeding, a fee determined in accordance with this section must be paid to the government, before the issue of any grant or before any resealing, as the case may be, on behalf of the estate of a deceased by the personal representative of the deceased but is payable by that personal representative in his, her or its representative capacity only.

(2)  No fee is payable under this Act

(a) on a grant de bonis non, a cessate grant or a double probate, or

(b) if the value of the estate does not exceed $25 000.

(3)  If the value of the estate exceeds $25 000, whether disclosed to the court before or after the issue of the grant or before or after the resealing, as the case may be, the amount of fee payable is

(a) $6 for every $1 000 or part of $1 000 by which the value of the estate exceeds $25 000 but is not more than $50 000, plus

(b) $14 for every $1 000 or part of $1 000 by which the value of the estate exceeds $50 000.

(4)  If, after the issue of any grant or after any resealing, the personal representative learns of the existence of an asset of the deceased that was not disclosed in the Statement of Assets, Liabilities and Distribution exhibited to the affidavit leading to the grant or to the resealing, determines that the value attributed to an asset in that statement must be revised or determines that an asset was otherwise not properly disclosed, the personal representative must disclose to the court the existence and value of that asset and must pay to the government the difference between the fee paid before the issue of the grant or before the resealing and any greater fee that would have been payable under subsections (1) to (3) had the asset been disclosed or appropriately valued in the original Statement of Assets, Liabilities and Distribution.

If her house was the only thing in the estate and worth $650,000 the probate fees in BC would be worth $8.550.  If the house was in joint tenancy with right of survivorship, there would be no probate fees and no need to go to the time and effort of probating the will.

If the house is $1,050,000, you save $14,050.00

The big savings is in the paperwork after death.  Most of it goes away if you do not need to probate a will.

The rules are similar  for most provinces and states and there is no US Federal Estate tax now on amounts under $2,000,000 for 2007 and 2008 and $3,500,000 for 2009.  Individual states do have estate tax however but the rates change from state to state.  You can see the Ohio taxes (as an example) at

Because the family house falls into a taxable estate, the joint tenancy rule in Canada does not work the same in the USA when there is a taxable estate but can still save a lot of paperwork.

The original Q & A follows

My question is: Canadian-specific

QUESTION: I am an only child. My elderly parents own a home which will some day come to me. Is there a tax advantage to having the home put in all three of our names now and as any one of us passes on the house is already in the  survivors names. If yes what is the process to get this done.

david ingram replies:

If you put the home into joint tenancy with right of survivorship, the home  does not pass through probate upon any of the member's death.  With the value of some homes today, that can be a significant saving in probate fees in some provinces and states.

However, after the transfer form mom and dad as "joint tenants with right of survivorship" to mom, dad and you as  "joint tenants with right of survivorship", the property is bound to go up in value and theoretically, if it is "yours", you would owe capital gains tax on your share when eventually sold.

The solution is to have a side agreement which states that your name is on title for estate and probate purposes and that you are holding what ever share (there could be three or four kids along with mom and dad) you have in  trust for them and that you will not pledge it as security, will not list it as an asset and will not make any effort to partition the property and have it registered as tenants in common.

Many lawyers are not happy with this arrangement but I have seen it done many, many times and never challenged by the CRA or IRS. 


david ingram's US / Canada Services
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Phone consultations are $450 for 15 minutes to 50 minutes (professional hour). Please note that GST is added if product remains in Canada or is to be returned to Canada or a phone consultation is in Canada. ($472.50 with GST for in person or if you are on the telephone in Canada) expert  US Canada Canadian American  Mexican Income Tax  service and help.
This is not intended to be definitive but in general I am quoting $900 to $3,000 for a dual country tax return.

$900 would be one T4 slip one W2 slip one or two interest slips and you lived in one country only (but were filing both countries) - no self employment or rentals or capital gains - you did not move into or out of the country in this year.
$1,200 would be the same with one rental
$1,300 would be the same with one business no rental
$1,300 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.
$1,600 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

$1,700 would be for two people with income from two countries

$3,000 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 $200.00 up. However, if you have a stack of 1099, or T3 or T4A or T5 or K1 reporting forms, expect to pay an average of $10.00 each with up to $50.00 for a K1 or T5013 or T5008 or T101 --- Income trusts with amounts in box 42 are an even larger problem and will be more expensive. - i.e. 20 information slips will be at least $350.00
With a Rental for $400, two or three rentals for $550 to $700 (i.e. $150 per rental) First year Rental - plus $250.
A Business for $400 - Rental and business likely $550 to $700
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 $900 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.

Catch - up returns for the US where we use the Canadian return as a guide for seven years at a time will be from $150 to $600.00 per year depending upon numbers of bank accounts, RRSP's, existence of rental houses, self employment, etc. Note that these returns tend to be informational rather than taxable.  In fact, if there are children involved, we usually get refunds of $1,000 per child per year for 3 years.  We have done several catch-ups where the client has received as much as $6,000 back for an $1,800 bill and one recently with 6 children is resulting in over $12,000 refund. 

Email and Faxed information is convenient for the sender but very time consuming and hard to keep track of when they come in multiple files.  As of May 1, 2008, we will charge or be charging a surcharge for information that comes in more than two files.  It can take us a valuable hour or more  to try and put together the file when someone sends 10 emails or 15 attachments, etc. We had one return with over 50 faxes and emails for instance. 

This is a guideline not etched in stone.  If you do your own TDF-90 forms, it is to your advantage. However, if we put them in the first year, the computer carries them forward beautifully.


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