Principal Residence Exemption

Leveraging, renting vs owning, making an investment or buying a home?
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blackball
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Principal Residence Exemption

Post by blackball »

Hi:

Would like to better understand the principal residence exemption and how recent changes may impact my purchase of a house.

My mom purchased a home last year and had my name added to the title of the property. I do not live in the house nor do I currently own another house. Would I be liable for paying capital gains tax if she sells the house prior to me purchasing a property next year or after I purchase a property next year? Does it make a difference that I did not pay any money towards the purchase of her home (i.e. similar to attribution rules for income/capital gains on purchase of stocks in a joint account)?

Wondering if I should ask to have my name removed from the title of the house prior to purchasing a property of my "own".

Additional Info: I am married and both myself and my mother are Canadian citizens.

Thanks,

BB
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kcowan
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Re: Principal Residence Exemption

Post by kcowan »

Any capital gains that are made since purchase on your 50% would be taxable when she sells the house, or her estate sells the house. If it is JTWROS, then you avoid paying probate on her half.
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AltaRed
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Re: Principal Residence Exemption

Post by AltaRed »

The OP said that s/he did not contribute anything to the purchase of the house. I'd suggest that as long as the OP does not contribute to the operation and maintenance of the house, and maintains financial records to show CRA that the OP never spend a dime on the house, s/he should be able to defend the notion that s/he does not have a beneficial interest in the home.

That said, I have always maintained that it is foolhardy to have joint ownership in a property when it is not necessary to do so. There are many threads here and elsewhere, and articles that talk about all the legal implications of being involved in joint ownership. Ranging from property distribution resulting from a divorce, creditor assignment due to debt collection, etc, etc, etc. The so called advantage of avoiding probate costs is a silly one, pennywise and pound foolish.
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twa2w
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Re: Principal Residence Exemption

Post by twa2w »

The house is your mothers principal residence. It is fully exempt under the current rules. You do not have to worry about the fact your name is on title.
You can call CRA and confirm this or look up the appropriate information on their website.
From the CRA
Ownership is required
2.9 For a property to be a taxpayer’s principal residence for a particular year, he or she must own the property in the year. This requirement is met where the taxpayer is the owner (including a beneficial owner) of the property. The taxpayer’s ownership of the property qualifies for purposes of the section 54 definition of principal residence whether such ownership is jointly with another person or otherwise. These latter words include sole ownership or a form of co–ownership. The meaning of ownership of property is discussed in more detail in ¶2.79 - 2.80. The meaning of beneficial ownership of property as applied in the Province of Quebec is discussed in more detail in ¶2.83 - 2.85.

Section 2.79 expands on this and the tax courts have also ruled this way. I have also confirmed directly with CRA via tax ruling.


So from a tax perspective the OP has nothing to worry about even if he buys another house that is his principal residence. His mother could also be on title to his property and each would get the full exemption providing they met the other criteria.

However AR is correct in that there are issues with joint ownership that should not be ignored.

Cheers
J
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Re: Principal Residence Exemption

Post by BRIAN5000 »

How does being on title an having no Beneficial interest effect your eligibility for first time buyers grants or RRSP Home Buyers Plan? When I bought my first home the government contributed almost 10%.
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