What are the tax consequences of real estate joint ownership when one owner dies?

I’m not sure where your wife resides, but the tax rules of that particular country will likely come into play if and when your wife sells the condo. In addition, there will likely also be tax consequences in Canada.

There are three factors that could impact whether and how much tax your wife might pay on the condo, if she sells it or otherwise disposes of it:

  • Keeping the condo or not: The first is whether your wife continues to own the condo after her mother passes away, or whether she sells it. Keep in mind that if your wife has not lived in the condo as her principal residence, she may owe capital gains tax on her share of the condo starting from when it was first purchased, and then on the full condo after her mother passes away.
  • Renting out the condo or not: If your wife keeps the condo, the second factor is whether it’s used as a rental property.
  • Living in Canada or abroad: The third factor is where your wife is living when the condo is sold, whether that’s when your mother-in-law passes away, or sometime afterwards.

For example, let’s say that after your mother-in-law passes away, your wife keeps the condo—which she now owns 100%—and sells it sometime later. In that case, when she sells the condo she might face the following tax consequences:

  • Non-resident tax in Canada; or
  • Capital gains tax in Canada, and
  • Tax consequences in her country of residence upon sale.

If she does not keep the condo after her mother dies, or if she keeps it and rents it, the tax picture could look different again.

As you can see, the choices your wife makes about the condo after your mother-in-law’s death can have complex tax consequences, so it will be important to get the right advice from a qualified tax professional at the time of sale—or even before, so you can be prepared for the likely outcomes in her case.

This response was provided by FPAC Member Andrea Thompson, CFP®, CRPC (US), CLU, CHS, CDFA, a Senior Financial Planner, Coleman Wealth at Raymond James Ltd. in Toronto. Information provided is not a solicitation and although obtained from sources considered reliable, is not guaranteed. The view and opinions contained in the article are those of the author, not Raymond James Ltd. Raymond James Ltd. member of Canadian Investor Protection Fund.

Andrea focuses on working with clients to create long-term, holistic planning solutions that integrate all aspects of their financial lives, including cross-border (US/CAN) and domestic retirement, education and estate planning, risk management, philanthropic strategies, taxation, cash flow and debt management strategies.

Qualified Advice is written by members of FPAC (Financial Planning Association of Canada), a MoneySense content partner. The association’s goal is to set standards and principles that will allow financial planning to evolve into a knowledge-based profession that ultimately commands the credibility, public awareness and respect of other respected advisory professions, working closely with governments, regulators, financial planners, academia, vendors and the general public.

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