how to gift a condo?

[Icedawn]

I've been asked to figure out how parents' of a friend can gift a condo to him. Its a little ridiculous, but after 30 minutes of surfing around, I still haven't identified anything that outlines what's necessary.

They're hoping to avoid the need to hire a lawyer and what not...

anyone have any ideas? where should I go for information? Has anyone here gifted/received any real property?

[jerryhung]

Talk to a lawyer, Real Estate lawyer if you can

You'll need a lawyer anyway, for any deed transfer, might as well ask them, instead of RFD

[Keelie]

my husbands mother gave him our house. he had to pay something for it, and it ended up being $1. he also paid for the transfer of the title into his name. thats the tricky part, and you very well may need a lawyer for it to be done properly.

i love telling people we paid $1 for our house

[Khrak]

Out of curiosity... If the property was declared a rental before selling for $1, would that count as a loss equal to the value of the property?

[ghostryder]

I've been asked to figure out how parents' of a friend can gift a condo to him. Its a little ridiculous, but after 30 minutes of surfing around, I still haven't identified anything that outlines what's necessary.

This can get complicated though. The parents will have a "deemed disposition" when they give the house and will have to pay capital gains tax on the difference between what they paid and Fair Market Value at the time of transfer.

If the property was their personal residence then this gain is tax free under the "personal residence exemption", if it was not though they will have to pay.

[John_In_Vancouver]

Out of curiosity... If the property was declared a rental before selling for $1, would that count as a loss equal to the value of the property?

You could have bought it for $1 if it was a rental but the original seller would have had to pay capital gains based on the gain of Fair Market Value (FMV) - Adjusted Cost Base (ACB).

Fast forward now to the buyer choosing to sell this as a rental...

Correct me if I am wrong, assume you bought it for $1 from the original seller, and the original ACB was $200,000 and the current FMV is $300,000.

Now selling it will result in a capital gain of $299,999. With 50% capital gains inclusion and 43.7% tax (in BC), the tax payable is $65,549.78.

Typically there is no way around tax and the CRA is smart enough to have rules that prohibit selling for $1.

Personally selling your principal residence is tax free though.

[Icedawn]

Talk to a lawyer, Real Estate lawyer if you can

You'll need a lawyer anyway, for any deed transfer, might as well ask them, instead of RFD

really eh? didn't realize that a lawyer is necessary even for a deed transfer.. thought they were only needed for the title search.

my husbands mother gave him our house. he had to pay something for it, and it ended up being $1. he also paid for the transfer of the title into his name. thats the tricky part, and you very well may need a lawyer for it to be done properly.

any chance you remember if your husband used a lawyer for the title transfer? My cheap friends would really prefer to just take care of it themselves without paying a decent chunk of change to a lawyer for relatively little work.

[pitz]

I've been asked to figure out how parents' of a friend can gift a condo to him. Its a little ridiculous, but after 30 minutes of surfing around, I still haven't identified anything that outlines what's necessary.

If its not a principal residence, then they will need to determine its fair market value for the purposes of income tax. Here is where I would suggest they obtain the (usually free) services of a professional real estate person to give them an appraisal.

They're hoping to avoid the need to hire a lawyer and what not...

Shouldn't need a lawyer just to convey the title. Call your local land registrar or land titles and ask for the documentation required.

If its a principal residence, it might get a bit murkier. For instance, in some (maybe even all) provinces, title to a principal residence cannot be conveyed without both spouses obtaining independant legal advice.

This is to protect, for instance, against one spouse mortgaging or selling the house, abrogating the de facto ownership of the other spouse.

anyone have any ideas? where should I go for information? Has anyone here gifted/received any real property?

Its been done in my family, and no lawyer was required.

[pitz]

One technique could be used (consult a tax planner) is vendor-financing and a gradual sale of the property over the period of 5 years. Known as a 'capital gains reserve', this allows the tax burden to spread over a longer term.

You might also be able to structure the transaction so that an equity interest in the property is sold over the period of a number of years, incurring a capital gain in each year.

This could, depending on the sellors' circumstances, lead to an overall reduced tax burden.

Could be worth getting some professional advice if the value is significant, as a large one-time capital gains hit could be costly.

[Icedawn]

Thanks for the great comments Pitz.

Its not a principal residence, so yes, fair market value would be needed. Any idea if an official appraisal is needed? or can they just rely on the sale price of an identical condo one floor below without the last couple weeks?

I'll call the register, thanks for that

And the tax hit? yup, great idea, heard of that before. Decided to not bother since the capital gains is relatively small, only about 10-20K from my understanding since its only been a couple years on a cheap property.

Thanks again.