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About 6 years ago, I went on title with my daughter on a rental property with 50/50 share. The property is currently assessed at 1.1 million and was purchased for 850,000.
What would be the tax implications in the two options below
1. Gift my 50% of the share
2. Stay on title and setup right of survivorship
Also does the right of survivorship have to be put on title registry or can we just draft a document to this effect and have both sign it.
I look forward to your reply.
Dear Satinder,
Thank you for your question regarding the rental property you own jointly with your daughter. You’re right to review this carefully, as there are tax implications under both options you mentioned.
Based on the information you shared:
Because this is a rental property (not a principal residence), capital gains tax rules apply.
Option 1: Gifting Your 50% Interest to Your Daughter
For tax purposes, gifting is treated the same as selling your interest at fair market value.
You would be deemed to have disposed of your 50% interest at approximately $550,000. Based on an original cost of $425,000 (50% of $850,000), this results in a capital gain of approximately $125,000, of which 50% ($62,500) would be taxable and reported in the year of the gift.
There is no rollover available for gifting rental property to an adult child.
Option 2: Remaining on Title with Right of Survivorship
During your lifetime
On death
Right of survivorship may help with probate, but it does not eliminate capital gains tax.
Right of Survivorship – Documentation
To be effective, right of survivorship must be properly registered on title (typically as joint tenants). A separate written agreement alone is generally not sufficient for land registry or tax purposes.
Summary
Given the values involved, coordinated tax and legal advice is strongly recommended before proceeding.
If you would like to discuss this in more detail, we would be happy to arrange a consultation.
Kind regards,
Allan Madan, CPA, CA
Madan CPA Professional Corporation
in Accounting & Taxation Services
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