Principal Residence, Joint Ownership And Death

by Tax Guy - Burlington Accountant on February 20, 2011 Print This Post Print This Post

This question was originally posted in February 2009. The reader had asked about how the principal residence exemption is handled following the death of the property owner.

Question: My mother died Jan 2007, and left her house and estate to me in her will.

My name was added to the house deed just before her death in October 2006. The home was her principal residence, but not mine.

The house was sold in March 2008 to a third party. The value of the property at time of death and at the time of sale did not change (according to real estate agent).

How do I report this property on income tax. Is it on her estate income tax or mine?

Given that the house value did not change between the death and sale, there should not be any capital gains.  I have searched the net for any guidance on this, can you help me. Probate was not necessary as all documents were in my name as well as hers.

Technically your mother would have been deemed to have sold 50% of her home to you in October 2006 and you would have acquired 50% of the home at that time. Given the above you may have a capital loss or gain from October 2006 until sale and your mom’s estate would have a taxable capital gain from death until sale.

Now the property should have been valued at the time of transfer to joint ownership, death, and subsequent sale to determine the gains or losses.  The CRA may look at comparable property in the area to assess value.

If the intent was to transfer to joint ownership for convenience then there is no capital gain or loss to either you your mom or her estate.  But probate should have been paid.

About The Tax Guy...

Dean Paley CGA CFP is a Burlington accountant and financial planner who services individuals and business owners locally, nationally and internationally. Dean has appeared in the National Post, Toronto Star and Metro News.

To find out more, visit Dean's website Dean Paley CGA CFP or connect via Twitter @DeanPaleyCGACFP.

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