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.
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{ 6 comments… read them below or add one }
Dear Tax Guy,
My mother passed away in Ontario, July 21/09, leaving me, her only child all her property consisting of 90 acres and a large home. My wife and I have lived in that home, in order to care for her, for approximately the last 10 years. We have no other principal residence as we sold it in order to live with and care for her. Are we entitled to any tax exemptions because this is currently our principal residence.
Thankyou……..Bill
@ Bill:
If the home was your mom’s principal residence before her death and the home was left to you and you ordinarily occupy it, then it is your principal residence.
In this case it appears there are no tax consequences.
mom and dad own their primary residence in Canada. son was added to the deed without consideration many years ago “to ease and facilitate financial affairs” in case of disability or death of mom and dad. son became US resident. upon sale Canadian tax was withheld because of non resident ownership. how do you eliminate the witholding as the son had no equity rights to the Canadian property.
Unfortunately, one of the registered owners of the property was the son and the Income Tax Act requires that the purchaser withhold the tax from the proceeds. There is no recovery for withholding tax in this case.
The son should never of have been added in the first place. Too many things can go wrong.
Re, your answer “probate should have been paid”. This surprises me. Isn’t probate a court fee paid for the service of having the will confirmed by the court and not a provincial estate tax on assets?
It is a court fee for having the Will confirmed. The point was that the property was re-registered as joint tenants with rights of survivorship (JTWROS) which would trigger a deemed disposition. Since he acquired the property any future gains were taxable to him on his portion of ownership.
In many cases, it’s best to just leave it along and not bother with JTWROS (unless its with a spouse) and let the house be subject to probate. This is because the deceased can claim the principal residence exemption on death. But now he may incur a capital gain that would be higher than the probate value.
JTWROS with anyone other than a spouse is absolutely poor estate planning and anyone contemplating it for estate planning purposes should seek the advice of a lawyer and an accountant beforehand.