Selling Your House to Your Son for $1 in Canada
Yes, you can technically sell your house to your son for $1, but there are several important considerations and potential consequences you should be aware of.
Legal Aspects
- Transfer of Ownership
Transferring ownership of your property to your son for $1 is legally possible. This is often referred to as a “gift” rather than a sale. You’ll need to complete the necessary paperwork, including a transfer deed, and file it with the land registry office in your province.
- Tax Implications
- Capital Gains Tax: If the property is not your principal residence, you may be subject to capital gains tax based on the property’s fair market value at the time of the transfer, not the $1 sale price.
- Land Transfer Tax: Depending on the province, land transfer tax might still be applicable. Some provinces offer exemptions for transfers between family members, but you must check the specific regulations in your area.
- Gift Tax: Canada does not have a gift tax, but the Canada Revenue Agency (CRA) will consider the transfer a disposition at fair market value, potentially resulting in capital gains tax for the donor.
Mortgage and Financial Considerations
– Existing Mortgage
If there is an existing mortgage on the property, the lender must be notified and will likely require the mortgage to be paid off or transferred, which could involve additional fees and qualifications.
– Property Taxes
The property’s assessed value for property tax purposes will likely be based on the market value, not the $1 transfer price, which means property taxes will remain based on the current market value of the property.
Practical Considerations
– Fair Market Value
It’s important to establish the fair market value of the property at the time of the transfer to avoid potential disputes with the CRA. An appraisal by a professional appraiser can provide a clear market value assessment.
– Family Dynamics
While transferring property for a nominal amount can be a way to assist family members, it’s essential to consider the long-term implications on family dynamics and the potential for future disputes.
Selling your house to your son for $1 is possible in Canada, but it comes with significant tax and legal implications. It’s advisable to consult with a real estate lawyer and a tax professional to fully understand the consequences and ensure the transfer is executed correctly.