Hello,
I have quick question regarding capital gains and selling a house. Here is a situation:
I have bought house together with my brother as it was only way to get approved for mortgage. He is on mortgage and title as co-owner. This house is my principal residence, only I and my wife live in it and I am only one that has been paying mortgage.
We are planing to sell this house and I will be buying a new one. All of the proceeds will be kept by me, none of it going to my brother. What we are not sure is how will capital gains work for my brother as he was there only to help me get mortgage. He does not own anything else, just rents apartment in different province where he works.
I know there will be no capital gains for me but will he have to pay capital gains on half of it when we do a sale or will he also be exempted as he does not own any other property at all?
Thank you for help.
Posts: 5775
Location: God's own country
Posted on: 04-10-14 05:43:03
Location: God's own country
Posted on: 04-10-14 05:43:03
Good question but very complicated as your brother works in different provinces and each province may likely have its own laws.
There is no point in seeking help from a public forum whose members you may not even know.
Please get professional advise from a tax consultant or from a real estate tax consultant by paying money. May be your MLS regd. broker can help you by taking advise from his parent office.
Murali The Krishna.
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I am a Gents and not a Ladies.
Quote:
Originally posted by burstun
Hello,
I have quick question regarding capital gains and selling a house. Here is a situation:
I have bought house together with my brother as it was only way to get approved for mortgage. He is on mortgage and title as co-owner. This house is my principal residence, only I and my wife live in it and I am only one that has been paying mortgage.
We are planing to sell this house and I will be buying a new one. All of the proceeds will be kept by me, none of it going to my brother. What we are not sure is how will capital gains work for my brother as he was there only to help me get mortgage. He does not own anything else, just rents apartment in different province where he works.
I know there will be no capital gains for me but will he have to pay capital gains on half of it when we do a sale or will he also be exempted as he does not own any other property at all?
Thank you for help.
HI Burstum,
It would be better for you to contact the Real Estate Lawyer who did your closing when you initially bought the house as he/she would let you know how the title was registered as it may not be very clear to you from the legal documents you have in your possession.
Based on your details I am presuming that it was your principal residence and in order for you to get the mortgage you needed the help of your brother whose name was also put on title on banks insistence. I am also assuming that the lawyer would have registered you and your wife as "Joint Tenant" on the title and your brother may have been registered as "Tenant in Common". However, as your brother does not own any other property and may not have claimed the house as principal residence then there may not be any capital gains for him but based on his percentage on title, there may be Land Transfer Tax implications only and your lawyer would be the best person to advise you on this matter.
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Pramod Chopra
Senior Mortgage Consultant
Mortgage Alliance Company of Canada
Quote:
Originally posted by burstun
Hello,
I have quick question regarding capital gains and selling a house. Here is a situation:
I have bought house together with my brother as it was only way to get approved for mortgage. He is on mortgage and title as co-owner. This house is my principal residence, only I and my wife live in it and I am only one that has been paying mortgage.
We are planing to sell this house and I will be buying a new one. All of the proceeds will be kept by me, none of it going to my brother. What we are not sure is how will capital gains work for my brother as he was there only to help me get mortgage. He does not own anything else, just rents apartment in different province where he works.
I know there will be no capital gains for me but will he have to pay capital gains on half of it when we do a sale or will he also be exempted as he does not own any other property at all?
Thank you for help.
You can go to the land registry office in your city and remove your brother from the Title of your home. It costs only about $ 200 or so. You need your brother's permission for that and his signature also. If he is willing and has no issue with that, then it will be a smooth transaction without any problems.
You can later remove him from your mortgage also , but you will need to requalify for the mtg again, as the bank wants to make sure you can carry the mtg payments on your own. Generally people wait till the mtg comes up for renewal and the existing mtg term is ending..not the mtg amortization which is generally 20-25 years , but the mtg term usually around 5 years.
Just removing him from the title should be enough to make him exempt from paying capital gains, but removing him from both title/mtg should be even better.
But consult an accountant or real estate lawyer for the finer details.
Quote:
The Mortgagor will not let him off the hook that easily and will make sure that the one holding the Mortgage, (The Mortgagee) can carry the payments and the removal of the co-signee will not jeopardize the wholeness and the status of the mortgage. Because they have two Individuals that they can make accountable to it, if there be a failure associated with it.
(Failure in their payments)
Not that all of these are not feasible. It has been done when the whole mortgage gets paid and they some times sit down and have a party and burn it too.
When one gets included in some one else's Mortgage as a co-signee, the co-signee looses his benefits of owning his FIRST Home, just with his inclusion into the agreement. That could be a good chunk in many a cases. So, people should be really grateful to that individual, if perchance they make a killing with the sale of it.
How can we know what our ownership situation is at a given time?
This may be done by checking the title to your property at the ISC website, http://www.isc.ca" rel="nofollow">LINK, or by attending a local ISC Customer Service Center. The legal description of your property may be obtained at your City Hall or other municipal office.
How can we change the ownership situation if we want to, and what will this cost?
If you want to transfer, sell, or otherwise “sever” or deal with the property, you would apply to do so by submitting the proper registration forms to ISC. You may obtain the forms by visiting the ISC website, http://www.isc.ca." rel="nofollow">LINK A lawyer should be asked about the consequences of your ownership of the property. There will be costs for a lawyer’s advice and title registration fees can be determined by asking your lawyer or inquiring at an ISC Customer Service Center or by contacting ISC toll-free at 1-866-275-4721.
What happens if a joint tenant or a tenant in common wants to sell the property, or if one of them passes away?
A joint tenant cannot sever and sell their interest in the property without the consent of the other joint owner or a court order. Upon the death of one of them, title passes to the survivor. If their deaths are at the same time (for example, in an accident) the title is split and each deceased joint owner’s estate handles the interests in the property. However if there is a “survivorship agreement” in place in such a case, title passes from the oldest joint tenant to the youngest, whose estate then handles the property.
A tenant in common may deal with their interest in the property as they wish. When a tenant in common dies, that person’s interest in the land is passed through their estate.
Please see below... :
How can we know what our ownership situation is at a given time?
This may be done by checking the title to your property at the ISC website, http://www.isc.ca" rel="nofollow">LINK, or by attending a local ISC Customer Service Center. The legal description of your property may be obtained at your City Hall or other municipal office.
How can we change the ownership situation if we want to, and what will this cost?
If you want to transfer, sell, or otherwise “sever” or deal with the property, you would apply to do so by submitting the proper registration forms to ISC. You may obtain the forms by visiting the ISC website, http://www.isc.ca." rel="nofollow">LINK A lawyer should be asked about the consequences of your ownership of the property. There will be costs for a lawyer’s advice and title registration fees can be determined by asking your lawyer or inquiring at an ISC Customer Service Centre or by contacting ISC toll-free at 1-866-275-4721.
What happens if a joint tenant or a tenant in common wants to sell the property, or if one of them passes away?
A joint tenant cannot sever and sell their interest in the property without the consent of the other joint owner or a court order. Upon the death of one of them, title passes to the survivor. If their deaths are at the same time (for example, in an accident) the title is split and each deceased joint owner’s estate handles the interests in the property. However if there is a “survivorship agreement” in place in such a case, title passes from the oldest joint tenant to the youngest, whose estate then handles the property.
A tenant in common may deal with their interest in the property as they wish. When a tenant in common dies, that person’s interest in the land is passed through their estate.
Link to it. : https://www.isc.ca/Pages/default.aspx
All of this holds good for those who are living here in Canada. For those who live between Timbuck One and Timbuck Three, please see a good lawyer who works in Timbuck Two.
FH.
As a first time property owner or one with a share in it, it should be Tax FREE for all concerned. But if the co-signee is from a different province, you must find out the ruling that the province has made with citations made from the previous rulings in that province.
fh
