Question: Ontario Elderly woman wishes to sign over principal residence and lake property to her son and her brother. What are the tax implications for each party? Thank you.
The implications of the transfer is the same in all provinces. First, the transfer occurs at the fair market value at the time of the transfer. The elderly woman will have no income tax consequences from the transfer as she may claim the principal residence exclusion.
The two others who receive the property are considered to have received the property at its fair market value at the time of the transfer. There are no immediate income tax consequences. If the property is ordinarily inhabited by both or either of the men, they may claim the principal residence exclusion and may be free from income tax on subsequent re-sale. If the property cannot be claimed as a principal residence by the men then the subsequent sale would cause a capital gain or loss. The gain would be taxable and the loss may be denied if the property is for personal use.
Before the transfer, I would ask that the elderly woman seek independent legal advice.