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How a person can add someone to a title without paying property transfer tax. Usually that person contributed to the acquisition and has been helping paying the mortgage. Unless the person is a “related individual” as defined in the Property Transfer Tax Act and the transferor or the transferee has been living there as his/her principal residence for at least 6 months, then property transfer tax has to be paid. A related individual under the Act is a direct relative, e.g. son, daughter, parent grandparent. Siblings and aunts and uncles do not fall within the definition and the transfer tax has to be paid for transfers to them.

 

I have been asked if a company can transfer its property free of property transfer tax to its shareholders. The answer is no as the company is a separate legal entity from its shareholders. Only if the company was holding the property in trust and the trust declaration was registered when the transfer to the company was registered, can the transfer be done free of property transfer tax.

 

From an income tax point of view, the law is that on any disposition, or deemed disposition, of capital property, tax is payable on any capital gains. The main exception to this is for dispositions of a primary residence. There is no tax payable on the capital gains from a disposition of a primary residence.  A deemed disposition occurs when a person dies, there is a gift of property or there is a change of use of the property, e g. it goes from being your primary residence to a rental property, or from a rental property to being your primary residence. The gain has to be determined at that time and any applicable tax paid. So before anyone takes title to, or transfers title to, all or part of a primary residence or any other property, even if a family member is involved, they should consult with their tax advisor as to possible tax consequences. Once you do something it is difficult and potentially costly to undo it.

David Simon, lawyer

 

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