If I gifted my only principal residence to my sister (adult) at a price of $1.00, what should I report the proceed in my T1 tax return? $1.00 or the house market price? As the legal document said the consideration given is $1.00.
This is a bad idea. If you transferred your property to your sister for below fair market value (e.g. for $1), then the CRA will reassess the sales price to be equal to the fair market value of your property at the time of the transfer. What’s worse is that your sister’s cost basis in the property will remain at $1, which means that if she sells the property for more than $1, any excess will be treated as a capital gain. This is a form of double taxation.
In order to avoid such a situation, gift the property to your sister for $0 of consideration. In this case, the deemed selling price will still be equal to the fair market value of the property as of the date of the gift, but your sister’s cost basis in the property will also be equal to the fair market value of the property.
Complete Schedule 3 and Form T2091, principal residence exemption, and report the price equal to the fair market value of the property on the date of the gift. To determine the fair market value, hire a certified appraiser.