No clue. Parents meeting with accountant and lawyer in a few weeks.
I'll leave them to decide on how to proceed.
Whether they sell, keep, or leave to me I'm OK and will make it work somehow.
If it needs to be sold...then so be it.
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So....election in 2024!?
- Thread starter mimico_polak
- Start date
I'll leave them to decide on how to proceed.
Whether they sell, keep, or leave to me I'm OK and will make it work somehow.
If it needs to be sold...then so be it.
Mad Mike
Well-known member
In your example....
1) Adjusted cost base. You can add the following items to the initial purchase price for purposes of calculating capital gain:
- closing expenses to the purchase price (legal, taxes, commissions, repairs needed to make the property ready to move into).
- the cost for any improvements or renovations made to improve the property value. For example, if you add a garage or an addition
2) The capital gain is calculated by subtracting the adjusted cost base + selling costs cost base from the disposition value (sale value). So
Assuming your adjusted cost base is $80K, you'll have $5K in selling costs and the property is worth $500K. The capital gain would be
$500-$80-$5=$405K (or $202.5K for each of your parents)
Under the current system, 50% the gain is added to your parent's income, or ~$100K each. Depending on their existing income, im guessing tax on that gain is between $12K and $44K each. You can get a good estimate at: Ontario income tax calculator 2023-2024 | TurboTax® Canada First calculate your parent's normal tax based on their income (record the amount). Next, add their portion of the capital gain ($101,750) and recalculate. The difference between the first (on regular income) and the second calculation (regular income + capital gain) is the amount of tax triggered for each parent by the capital gain.
Don't sweat the 66.7% inclusion rate unless you think the cottage will jump to $750K by year-end.
Note: If you get a mortgage on the cottage to cover the tax, you'll also be liable for land transfer tax that is computed based on the cost of the mortgage.
Mad Mike
Well-known member
I don't think it works that way. The exemption is on a year by year basis, I'm pretty sure CRA keeps an average book for this calculation. When I moved to California, I sold a house I had lived in for 5 years, but owned for 7. CRA dinged me for the CG on the last 2 years when I wasn't a principal resident.
When you go between or in and out of 2 or more principal residences, you get the exemption for one, but not the other -- so unless the properties have a massive difference in appreciation, it usually washes out.
Wealthiest 0.1% according to Freeland.
https://www.cbc.ca/news/politics/federal-budget-2024-highlights-need-to-know-1.7175062
Where I was going with it... I know of many examples of a simpler version of what I was "hypotheticallizing" but with less steps, maybe they just flew under the CRA radar....
They owned two properties...
First one was their PR in the city, a condo or house.
Second property was income (condo or house) or in other cases a cottage. Not their PR.
They sold the first property that was their PR.
Moved into the second and made that their PR, no change of ownership.
Lived there for many years, sold (or died) and no CGs on that sale as it was their PR for years...
Technically from the feedback here I guess they needed to figure out how much the second property appreciated between purchase and until it became their PR but the CRA never asked/came for that. Maybe comeuppance is on the way one day???
I have seen this done a few ways:
One couple bought a house in the burbs and rented it out, lived the hipster DT life in their condo until kids were on the way, then moved to the house and sold the condo (this got them the house before they were priced out of the market).
A few moved to the cottage to retire or lately WFH until they sold or in one case died.
A few others used it as an emptynester downsizing technique with income on a smaller house or condo until the time came to downsize.
I don't have the baller money to excute such a plan but how many years before the CRA just does not notice or just does not care? Maybe things were just laxer?
They owned two properties...
First one was their PR in the city, a condo or house.
Second property was income (condo or house) or in other cases a cottage. Not their PR.
They sold the first property that was their PR.
Moved into the second and made that their PR, no change of ownership.
Lived there for many years, sold (or died) and no CGs on that sale as it was their PR for years...
Technically from the feedback here I guess they needed to figure out how much the second property appreciated between purchase and until it became their PR but the CRA never asked/came for that. Maybe comeuppance is on the way one day???
I have seen this done a few ways:
One couple bought a house in the burbs and rented it out, lived the hipster DT life in their condo until kids were on the way, then moved to the house and sold the condo (this got them the house before they were priced out of the market).
A few moved to the cottage to retire or lately WFH until they sold or in one case died.
A few others used it as an emptynester downsizing technique with income on a smaller house or condo until the time came to downsize.
I don't have the baller money to excute such a plan but how many years before the CRA just does not notice or just does not care? Maybe things were just laxer?
Dumb witch. The people I know that it effects are a few orders of magnitude or more lower than that.
This is exactly how it reads to me. You can flip flop at will but you should be paying tax on the time differences.
They (cra) weren't paying any attention. Now you have to report sales on your income tax form so that could trigger a look at principal residence cg claims. They are still super lax with flipping and people declaring it was their pr even during a gut. It is trivial to catch most of them but cra doesn't bother.
Mad Mike
Well-known member
That's the way it's supposed to work. Of course time can make that harder and since the gain will be relatively small for 3 of 20 years, it would probably fly under the radar.
Plenty of folks have cheated CRA over the years, it's not hard as you're self-declaring and they don't check. Every once and a while a red flag triggers an audit, and once and a while CRA will blitz an area that has been abused. They have the tools to figure out if you cheated the tax man -- if you did you'll be in for a whopper of a tax bill + interest. Unless you're a serial tax criminal, CRA will probably waive the 50% penalty if you agree to pay up, if you choose to fight then you better win because that penalty is assessed if you turn down their settlement offer.
If I ran the CRA, I'd be looking for some low-hanging fruit. Any pre-build purchase by an existing homeowner, any property that is resold within 18 mos, and every property purchased by a real estate agent.
Well doesn't she walk everywhere to stay "green"...Well, she certainly doesn't miss leg day.
Effin' Oompa Loompa.
She ‘doesn’t own a car’…just gets chauffeured everywhere on our dime.
Liberal budget promises 10 bajillion dollars to whatever thing you’re into
OTTAWA - The new Liberal budget was officially released yesterday, with the government unveiling a number of plans involving new programs and spending, including $10 bajillion dollars for whatever thing you happen to be into right now.
www.thebeaverton.com
Snap her like a twig.
This thread makes me sad/angry. We have a family property in Hillburgh that's been a part of the family for well over 100 years, but when it eventually get passed to us grand kids, no way will we be able to afford the CG on it. It's 35 acres and the portion that was severed off 20 years ago is now being turned into 300+houses, a school, park etc. So it'll definitely be worth way more than the couple thousands it was purchased for back in the day. 
If possible, get added to the title as 'tenants in common' and then change that location to your principal residence (at least on paper). Technically your husband could keep your current house as his principle residence if you guys own it. You may have to do some research on what you need to be careful of as you`re playing fast and loose with the rules but it's not illegal.This thread makes me sad/angry. We have a family property in Hillburgh that's been a part of the family for well over 100 years, but when it eventually get passed to us grand kids, no way will we be able to afford the CG on it. It's 35 acres and the portion that was severed off 20 years ago is now being turned into 300+houses, a school, park etc. So it'll definitely be worth way more than the couple thousands it was purchased for back in the day.
It's not perfect, if a principle resident of Hillburgh passed away before their spouse then CG would be due for them to inherit.
Capital gains are only a portion of the value . A percentage. If you can’t afford it you sell it and still have bags of money , if you keep it your net worth went up hundreds of thousands .
I can understand sentimentality and appreciate it , but it’s hundreds of thousands , you can feel sad in a smaller cottage .
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I can understand sentimentality and appreciate it , but it’s hundreds of thousands , you can feel sad in a smaller cottage .
Sent from my iPhone using GTAMotorcycle.com
Cottage (and "the farm") dilution has been going on forever. It's basic pie graph math. More children/cousins, smaller slices.The tax restructuring just introduced that is reducing it (shrinking slice value) is just bringing it to the forefront.
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