Hi,
My parents and I own a rental property by through joint tenancy ownership (each owner own equal share). If I remove both of their names from the title, do they need to pay capital gain taxes as if they sold their share of the property (2/3=66.7%) at market price (appraisal value)?
There wouldn't be any actual transactions, as essentially, we are converting ownership of the property from joint tenancy to sole ownership.
Thanks!
Yes, they would have to pay capital gains at the market price. By giving their shares of ownership to you, they have been deemed to have disposed of the property at fair market value, and you have received their shares at fair market value.
It’s the same as if they had passed away and you inherited their portions.
Thanks for the quick reply! really appreciate it!
A couple follow up questions:
1, Do I have any tax implications from receiving their share of the property? Since my ownership increased from 33% to 100%. Do I need to notify CRA of this change in ownership % ?
2, If we convert the ownership from Joint Tenancy to Tenants in Common. I take 98%, and my parents each take 1%. Same logic of the tax implication applies? My parents would be paying capital gain for disposing their share of 32% each, from 33% to 1%?
3, Since there wouldn't be an actual sale of property here, does CRA clearly defines how the FMV (fair market value) will be determined? Based on provincial government’s assessment value?
Thanks again! 🙂
The only tax implications you might have is when you sell the property, and those will depend on how you use the property. If it remains a rental property you'll pay capital gains tax when you sell.
The same tax rules apply whether you are Joint Tenancy or Tenants in Common.
The CRA doesn't specify how you would get the FMV. It might be a good idea to get a professional appraiser to give you a value. The value of the property on your property tax bill may be too low.