Plan before you change title

The Tax Court of Canada released a decision last month, called Balanko Estate v. R. The summary of the case states that the “taxpayer” purchased a property at Whistler in 1976. Apparently, the taxpayer separated from her husband in 1983. No separation agreement was made.

In 1991, the taxpayer transferred title to the Whistler property to her husband for $1.00, and did not report the disposition to CRA. In 2003, the husband sold the property for $350,000.00.

CRA attributed the gain to the taxpayer, who died in 2005. The husband did not designate the Whistler property as his main residence. He had designated another property as such, from 1992 until his death in 2011.

Remember that in Canada, a couple can only have one property designated as a main residence (thereby avoiding any capital gain on its sale).

CRA’s position here was that another family member had designated a different property as his main residence during the time the Whistler property was transferred (wife to husband) and sold (by the husband). The capital gain that CRA calculated was $243,009, and the taxpayer was held liable to pay it.

The Court also held, in the Estate’s appeal, that a written separation agreement was required to avoid a capital gain. Since none was found, the tax is payable.

In my opinion, any transfer of title in B.C. should be preceded by careful planning. Talk to your advisor.

This ad ran in the Richmond Review on May 1, 2015.