Real Estate

Family Property transfer question

  • Last Updated:
  • May 14th, 2019 11:26 am
[OP]
Newbie
May 12, 2019
16 posts
2 upvotes
vancouver

Family Property transfer question

We were planning to sell our primary residence to my parents in order to size up. The real estate lawyer has mentioned that if I were to transfer such property to my parents, they could save on property transfer tax, and there would be no capital gain for us. My parents will be using it as a investment property, will they need to pay or incur any type of tax for this transfer?

They will be helping us with the cash for our new home. However they may need to open up a credit line/mortgage to do so. They have a fully paid off investment property they are thinking to use as leverage for the mortgage, is the interest from this investment property tax deductible?

Last question is if I were to transfer to my parents, when they sell this investment proprety, do they have to pay the capital gain base on FMV at the time of transfer, or when I originally purchased it?


Thank you for anyone that can shed some light on this.
4 replies
Member
Oct 21, 2013
284 posts
140 upvotes
waterloo, on
So - capital gain tax is always on investment property. and land transfer tax is paid by the buyer. 2 things are happening.

1. you're selling your PRIMARY residence to your parents. You will NOT incur capital gain tax as this is your primary residence.

2. When your parents sell this investment property - they will have to pay capital gain tax depending on the selling price of the property. 50% of the appreciated value is taxed. For example, you sell them for 200,000 and in future they sell it for 300,000. Then appreciated value is 300,000 - 200,000 = 100,000 $ . 50% off 100,000 = 50,000$. So they will pay the tax on 50,000. its taxed according to their marginal tax rate at the time of selling.

3. Interest portion on investment property can be 100% written off against income.

I hope that helps.
Last edited by DealsFreak on May 14th, 2019 7:39 am, edited 1 time in total.
Serving Kitchener/Waterloo/Guelph/London/Hamilton/Niagara and surrounding areas
Member
Jul 26, 2015
214 posts
135 upvotes
Vancouver, BC
DealsFreak wrote:
1. you're selling your PRIMARY residence to your parents. Property Tax will be paid by your parents as they are the buyers.
DealsFreak is spot on the Capital gains explanations. A very detailed and informative post.

However, the above property transfer tax comment is incorrect. Probably there are differences between Ontario and BC. I see that OP is from Vancouver.

For BC:
When a related individual transfers a principal residence or an interest in a principal
residence to you, you may be exempt from paying PTT.
A related individual includes:
 Your spouse, child, grandchild, great-grandchild, parent, grandparent or
great-grandparent
 The spouse of your child, grandchild or great-grandchild
 The child, parent, grandparent or great-grandparent of your spouse

Therefore if you sell your property to your parents, then your parent will likely be exempt from paying PTT in British Columbia.
Member
Oct 21, 2013
284 posts
140 upvotes
waterloo, on
Sam286 wrote: DealsFreak is spot on the Capital gains explanations. A very detailed and informative post.

However, the above property transfer tax comment is incorrect. Probably there are differences between Ontario and BC. I see that OP is from Vancouver.

For BC:
When a related individual transfers a principal residence or an interest in a principal
residence to you, you may be exempt from paying PTT.
A related individual includes:
 Your spouse, child, grandchild, great-grandchild, parent, grandparent or
great-grandparent
 The spouse of your child, grandchild or great-grandchild
 The child, parent, grandparent or great-grandparent of your spouse

Therefore if you sell your property to your parents, then your parent will likely be exempt from paying PTT in British Columbia.
thank you for correcting me. I keep forgetting there are people from other provinces here. I ll remember next time :)
Serving Kitchener/Waterloo/Guelph/London/Hamilton/Niagara and surrounding areas
[OP]
Newbie
May 12, 2019
16 posts
2 upvotes
vancouver
Thank you so much for all the answers you guys have provided.

I understand if you transfer your property to family member, they are exempt from property transfer tax, but is it the same if you sell it to them (with actual sale contract)?

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