Who Really Owns Your Home for Tax Purposes?
So, you have bought a house and it is in your name. It was intended to be the house that you were going to live in, but things changed and you decided that you would like to let your parents live in it as you are travelling all of the time and only need a place to stay once in a while. Your parent’s are going to pay all of the expenses related to the house. So have they now become the beneficial owner of the house, and if so does this have any tax implications to it?
If this is a question you have, perhaps you are thinking that you can merely turn to the CRA information bulletins for the answer, but when you do the reality that nothing is simple really hits you.
Where the answer to this would become really significant is if you were going to sell the home, and whether you would now be responsible for a capital gains.
Once you start seeking out the answer to this question here is what you are likely going to discover.
- The information bulletins that the CRA produces in many cases are now being switched over to folios. These are quite technical in nature, and are meant to be interpreted by those that are more knowledgeable in tax issues.
- You are going to find out that these folios are basically an interpretation of the formal tax laws, to which there are many and are written in legal jargon.
- If you contact the CRA directly you may find it quite difficult to get a firm answer. Most likely you will be told that the law concerning principal residential ownership and beneficial ownership has to be determined on the specific circumstances that relate to you.
- If you don’t understand the information that you are being provided with by the CRA you could ask for a technical interpretation. You will find that this is generic, and is in written form and contains the CRA’s interpretation of the law related to your query. You do not have to pay for this interpretation.
- Now maybe the technical interpretation is still not giving you all the answers you need, but don’t worry because you can go a step further and ask for a Ruling. In this case you will receive a written statement that will outline how the laws will be applied to your specific transaction that you are thinking about implementing. This way you will have a clear understanding of what type of tax situation you will be in should you go ahead with what you are thinking. Now technical interpretations are usually only requested by professionals because there is specific criteria that must be met in order to apply for a ruling. Also, there is a charge for the ruling, and the cost for this can mount up.
The lesson to be learned here is that never assume that the tax laws and your tax situation is straight forward. It is most beneficial to utilize the services of a qualified and experienced tax accountant who has not only the knowledge of the current tax rules but past experience to lean on when helping you with your specific tax situation.