Parents bought duplex for kids. Ask a cross-border

My question is: Canadian-specific
QUESTION: My husband and I bought a duplex three years ago.  We bought it
for $150,000.00 with the intent that our daughter and her other half would
purchase it off of us when they could qualify for a mortgage. Since then the
market value has doubled...I realize we are subject to capital gains, but
how can we legally make it affordable for them to qualify for a mortgage.
They can'  afford to buy the property at the fair market value.  Can we add
her to our mortgage for now and split all income/expenses until they can buy
it? Can we stick to a predetermined sale price for the duplex?  We are
trying to look at the best scenario so that they can become homeowners.  We
did not make the investment for ourselves.  Thank you for your consideration
of my question and I look forward to hearing from you in the near future.
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david ingram replies:
If you and your husband have been showing it as a rental and claiming a loss
(as I bet you have been) then you are stuck with the capital gains tax.
On the other hand, if you bought it for them and they have been paying the
expenses and put the duplex rental on their tax return, you were just
holding it for them in trust.
If you truly want it to be theirs, give them the increased value, pay the
tax by charging them for that amount and they can put a mortgage on it for
about 60% of the appraised value.  If they do not qualify for the mortgage
at that level, you were pursuing an impossible idea anyway.
You really need to pay a few dollars and sit down and talk about it with
someone who understands trusts, constructive trusts (this would apply if
your daughter and son-in-law have done an amazing amount of work around the
property without charging you because they consider it theirs) and the whole
concept of holding a property in one name because of potential lawsuits,
possible divorces and failure to qualify for a mortgage.
It would help if you could prove that they tried to qualify in the first
place and you only took it over because the bank insisted that they would
not finance it unless it was in your name. (happens all the time if you are
not strong enough to stand up to the bank and take your business elsewhere).
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, Fred Snyder of Dundee Wealth
Management and I, David Ingram  will be hosting an INFOMERCIAL but 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/>
Local calls are taken at (604) 280-0600 and Long Distance calls are taken at
1( 866) 778-0600
I do not know how far the LD line reaches.
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