Tax implications when converting real estate from joint to sole ownership

Question

2533 viewsOctober 4, 2018

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Hugo (anonymous) Posted October 3, 2018

About 14 years ago we helped our daughter to purchase a house. The house is registered on our 3 names in equal parts. My daughter lived (and still lives) in the house all these years and it’s her principal residence. No part of the house was never rented or otherwise generating any income. Now we want to transfer our part to her for Zero Dollars. Is our part considered to be a deemed disposition? Are we, as the “gifters” or “transferors”, subject to capital gains tax arising from the transaction? I would appreciate your professional take on this situation. Thanks.

1 Answer

score 0 · Answer 1 · 2018-10-04T16:18:38+00:00

Hi Hugo,

The answer depends on whether you and your wife were (a) beneficial owners of the property, responsible for its maintenance, mortgage payments, utilities, and will participate in the profit on the eventual sale of the property, OR (b) title holders of the property, where you and your wife have no financial interest in the property and paid nothing towards the upkeep of the property, nor mortgage payments.

If the answer is “A” above, then there will be a capital gains tax on the gift of the property from you and your wife to your daughter. The capital gain will be equal to the difference between your and your wife’s share of the purchase price (i.e. 67%) and your and your wife’s share (67%) of the market value of the property on the date of the gift.

If the answer is “B” above, then there will be no capital gain when you and your wife gift / transfer the property to your daughter.

Tax implications when converting real estate from joint to sole ownership

1 Answer

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