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Legal Ease
Legal Ease, Lawyer
Category: Canada Tax
Satisfied Customers: 101445
Experience:  Lawyer
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Purchased property in 1978. Apartment attached to the main

Customer Question

Purchased property in 1978 for 59K. Apartment attached to the main house we claimed 25% expenses. We built a new double garage plus loft and a downstairs bathroom. Approx. cot 40K. Also purchased the lot initially part of the house property for 15K. In approx. 1980 changed the title of the house from my husband/wife to wife only, since my husband had started a business and did not want the house in both our names if someone would sue for something in his business... We sold the home for 300K. Whit an income gross of 70K (wife only income), what would be the implications of tax to be paid on capital gains.
Submitted: 1 year ago.
Category: Canada Tax
Expert:  keeperumiami replied 1 year ago.

Did you live in this property as your primary residence?

Did you rent the apartment? If so, did you rent it within the last 5 years?

When did you sell the home in 2015.

What is in your income of 70K? Does it included Social Security?

What about deductions, can you itemize or do you use the standard deduction?

What were your ages in 2015?

Customer: replied 1 year ago.
I did not mention that the expenses on the attached apt to the main house was always shown on my husband's income tax.
Customer: replied 1 year ago.
primary residence
Yes rented the apartment. Was rented from 1978 at time of purchase to selling in 2015. 25% of repairs allocated to apartment and shown on my husband's income tax.
April 2015 sale of house
Income includes OAS & CPP and Company Pension
Standard deductions
74 (husband) 68 wife
Expert:  keeperumiami replied 1 year ago.

I apologize, I'll have to opt out & let another expert answer. When I went to check on what state you are in, I noted that you are in Canada. Your question was categorized in the Capital Gains category, but didn't indicate you were in Canada. The other expert will need the information you provided anyway, so no problem. Sorry. Steve g.

Customer: replied 1 year ago.
We are located in Canada Province of Ontario. If you cannot answer my questions I would like my refund of charge....Tks
Expert:  Legal Ease replied 1 year ago.

I amlocated in Canada and I'm happy to assist you.

What portion of the total square footage of the home does the apartment to take up?

Customer: replied 1 year ago.
we have five bedrooms in main house and they have 1 bedroom small unit, which we considered being 1/4 of the house which was approx. 3000 sq ft.
Customer: replied 1 year ago.
Even though our house was in my name he still when doing his income tax put the expenses of the apartment on his tax return.
Expert:  Legal Ease replied 1 year ago.

Who declared the rental income?

Customer: replied 1 year ago.
My husband declared the income and expenses on the small one bedroom apt.
Expert:  Legal Ease replied 1 year ago.

And he did this even win the title was in your name?

Customer: replied 1 year ago.
he did.
Expert:  Legal Ease replied 1 year ago.

This is a bit complicated as frankly what your spouse did has created a bit of a mess. The house is not his and so the rental income and expenses should not have been declared by him.

This may come back to haunt you both now so really instead of proceeding on your own it would be much more prudent to retain a charted accountant to do your tax returns at least for this year.

In terms of the capital gains if your 25% calculation is accurate then the capital gains tax would be calculated based on the increase in value of the home over the years you owned it but 75% of that amount would be exempt as it was your principal residence. Then 1/2 of that amount would be included as your income for tax purposes.

But unfortunately, this becomes even more complex because you spouse was to have paid some capital gains tax when he transferred his ownership to you back in 1980.

I am happy to clarify anything you don't understand but the bot***** *****ne is after that you really do need to retain an accountant to help straighten out the mistakes that have been made.