Capital Gains Question...

[Weapon_R]

I know this topic has been discussed before, but maybe someone here knows the answer to my question. There wasn't quite the same scenario in previous threads

My dad is retiring and I am going to assume some property from him. The property, at city and market assessment, has appreciated considerably (approximately 5x its purchase price). Much of it was bought in the late 80s and early 90s. Some places no longer have any loans owing, and some have nominal amounts that are still being paid off.

My question is, if I were to take over this property and assume it under my name, what sort of tax implications are involved? Is there any way to assume the properties and minimize taxes or eliminate them altogether? Any ideas are appreciated.

[Altezza]

If you were to assume the properties, it would be a deemed disposition at market value and your father would pay taxes on the capital gains.

I know this sounds a bit morbid, but speak to an estate planner. They have a lot of ways of doing exactly what you want to do and minimizing CRA's tax bite. It's a very common scenario.

[bennyhanna]

Just a thought,

If you were to incorporate your name/business and transfered the properties into the business. Would your tax bracket change? Maybe it goes lower?

[Rav4Guy]

Anytime you transfer property to another person it's considered a deemed disposition meaning you pay taxes.

I believe you can do something with Joint Tenancy w/ right of survivorship or having insurance coverage to cover off the tax bill. Best best, like Altezza said, is to talk to an accountant.

[Xtrema]

Go talk to a few planners. Get a 2nd or 3rd opinion, especially the amount is huge.

On gifting:

Any advantages of gifting assets while alive are countered by the capital gains tax that could be triggered by the change of ownership. Canada Revenue Agency (CRA) considers a non-arms length transaction to be a sale that transacted at the market value of the asset. This means, for example, you could not sell to your children for $1 your $100,000 stock portfolio and then claim that you did not realize any capital gain. Gifting works well when the unrealized capital gain on the asset to be gifted is small, there is sufficient liquidity to cover any tax that might be due, and the assets and the income they generate are not needed to fund the lifestyle of the parents.

Just because he sign the house over doesn't mean he can avoid capital gains.

There are a few ways to reduce taxes but no way to avoid them completely.

[in*10*se]

imo: i think your dad can defer the CG in the future to you. (lets be honest here.....i'm not sure... )

it doesn't make sense to tax your dad for the deemed disposition cause lets say the deemed disposition yields 50k in tax.... thats bs... he doesn't have any income to pay for it since it was "deemed".(deemed = pretend that the property was sold)

thus i really think that you can get the property transferred at cost, and have the CG's taxed in your hands when u dispose of it, but go ask some professional, this is beyond after all, we're all in high school, omgwtfbbq.

Taken from Wealth Management and Estate Planning:
When an inter vivos transfer of property takes place from a taxpayer to an alter ego or joint partner trust, the rollover provision applies automatically unless the tax payer specifically elects to opt out of the rollover provision.
The tax consequences of the rollover provision are:
- the transferor is deemed to have disposed of the property at its adjusted cost base or UCC in the case of depreciable property
- the trust that acquires the property assumes the taxpayer's adjusted cost base for the property

meaning you inherit it at COST

The rollover treatment results in no capital gain or loss for the transferring spouse on the disposition of the property. The receiving trust takes ownership of the property, assuming the taxpayer's ACB on the property and tax on the CG is deferred until the trust disposes of the property at some time in the future. The CG is NOT eliminated, but rather tax on the CG will be deferred into the future.