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This is a two stage question - The question was asked (in maroon).I asked some other questions which were also answered in maroon.The final answer from me is at the end. To any one else, I have to say that there are over 200 questions stacked up now and I cannot possibley begin to answer them all. I am answering questions for existing clients and some who ask for a paid for consultation. I am trying to answer three or four a day of the free questions and I have added all questioners' names to the list because usually there is a similar question that I do answer. (PS, When I started this, my agreement was that I would answer two a week). Hah! - I have answered 1,735 free questions so far this year. However, enough real business comes from this list that I feel it is worthwhile. I just do not have the time available.
David Ingram
My question is: Applicable to both US and Canada
QUESTION: When my father in-law passed away in 1984 his will was written up as a sole survivor inheritance of his property (worth $80,000.00 at the time). That put the family home in a four way ownership: the surviving wife, and three children; with one daughter living in the USA. When my wife's mother passed away in 1999 the three remaining family members inherited the family home as per the sole survivor as the will requires.
The sister who lives in the USA had borrowed money from me and my wife and used her 1/3 share of the house as collateral. Her and her husband cannot satisfy the loan so she has agreed to sign over her share of the family home to my name as 1/3 title holder.
>From the information that I have been able to dig up, there is a non residence capital gains tax on the original inheritance of the house in 1984 when house became four way owned. This tax was never paid by the sister who lives in the US. The house, since then, has become three way owned because of the passing of the mother. There has never been an appreciable income from this property.
The question is, does the sister in the USA owe a capital gains tax on the original inheritance then another on the second phase of the inheritance? At the time of the original inheritance the property was worth $80,000.00. At the time of the mother's passing the property was worth $89,000.00. Today, when the sister wants to sign over her 1/3 share of the home the property is worth $99,000.00.
Please remember, this is not a cash sale but a signing over of property to satisfy a personal loan.
Best regards,
LXXXXXXXXXXXXX
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From: xxxxxxxxxxxxx
To: David Ingram at home - bus at [email protected]
Sent: Monday, December 01, 2003 9:48 AM
Subject: Re: US Daughter Inherited share of Canadian father's estate
Hi David,
Thanks for the prompt reply.
David Ingram at home - bus at [email protected] wrote:
Was the house a rental from 1984 to 1999 or did mom live in it as her house
"The house was not a rental property during the period mentioned". The mom lived in the house part time but spent most of the time living with my wife and I.
Whose name was the house actually registered in form 1984 to 1999, the estate of:? - mom's? or mom and three children?
The house, as per the will was transfered from the fathers name to his widow, and the three children. This remained so until the mother passed away in 1999.
Whose name is it registerd in now?
As per the will, the registered title of the property is now in the three surviving children's names.
what state does the US daughter live in?
The daughter who lives in the USA has lived full time in California since 1961. I do believe that her and her husband now have duel citizenship in Canada and the US.
David Ingram
It seems that the house was formally owned by the children as well. If this is the case, the gain in value of the shares is taxalbe to all the children, not just the American resident. To sell or transfer her share to you, you have to calculate her share of the profit, fill out a T2062 and get the CCRA to approve it for a reduced withholding of 25% of the profit as a non-resident withholding tax.
Then she has to do a Canadian return to report the sale and likely get 3 or 4 % of the tax back.
-
The answer would be different if the house was left to mom and the kids names were just put on for estate purposes and it was really mom's house in total.
In either case there was no tax to the US daughter on the original death in 1984 or the second death in 1999.
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