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Legal Ease
Legal Ease, Lawyer
Category: Canada Tax
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Experience:  Lawyer
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My mother put in an offer on a house 12 years ago but didn't

Customer Question

My mother put in an offer on a house 12 years ago but didn't qualify for a mortgage so the offer was transferred into my husband's name and he got the mortgage for her. The title remained in his name. For the first 8 years, my mom ran her business from the property and rented out one unit. My husband reported the income at income tax time but my mother got paid the profit of the rental property as her management fee. My mom was able to pay off the mortgage in full directly to the bank and so the title was transferred in her name. She paid all legal fees and there was not profit to my husband. Now we are doing our taxes and are told my husband must pay capital gains on what the property was worth at time of the transfer. I then heard about applying for beneficial ownership but my book-keeper is saying this is not possible. As he feels in RCA's eyes my husband benefited from owning the property..any advice?
Submitted: 8 months ago.
Category: Canada Tax
Expert:  Legal Ease replied 8 months ago.

what benefit does your accountant and say your husband received?

Customer: replied 8 months ago.
i believe he said the depreciation value of the property value each year.
I can't remember the exact term he used.
Expert:  Legal Ease replied 8 months ago.

So are you saying that at some point your spouse was actually reducing his taxes because he was on title to the home?

Customer: replied 8 months ago.
I believe this is what the accountant is saying. So I understand from CRA perspective that my husband benefitted but so did my mother. She got the monthly rent that paid all of the expenses that in turn paid down the mortgage. Is there any way to reduce the amount of capital gains if you feel we have no other options? It seems crazy that he held the mortgage all those years and now must pay possibly $20 000 in taxes. I feel we got penalized for helping my mother.
Customer: replied 8 months ago.
He did explain its 50% of capital gain thats taxable.
Expert:  Legal Ease replied 8 months ago.

He did get penalized for helping your mother. But that is not the fault of the CRA. If your spouse wanted to say he held a beneficial interest only to the house so that the title was in trust for your mother he should not have done anything to benefit from owning the house.

At this point in time fairness would dictate that your mother pays him back the capital gains tax as he did this for her.

But if your husband had a lawyer or accountant acting for him when he agreed to do this then he may have a claim against that lawyer or accountant because someone should have told him that this was the risk.

Customer: replied 8 months ago.
Ok. Unfortunately, the accountant knew the situation and should have explained this to us years ago. So is there any way to claim my mom as having some beneficiary ownership to reduce the capital gains or is this a loss cause? He held the mortgage for all those years...
Expert:  Legal Ease replied 8 months ago.

There's no harm in trying. But I really do think you should see a lawyer about the possibility of suing this accountant.

Customer: replied 8 months ago.
I attempted one lawsuit and I've spent $30 000 in legal fees and my lawyer neglects to file proper documentation to keep my case active, then he dies and am told I must sue the insurance company. I need to hire another lawyer to sue the insurance company and need another $8000. I've given up on that case...and my faith in the legal system is little to none.How do i go about applying for beneficiary ownership status? Or do I just claim it on income tax papers?
Expert:  Legal Ease replied 8 months ago.

I am sorry to hear this. I agree that the legal system has failed. The legal system is only good for the very wealthy. It is one reason and I spent so much time on the site.

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