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My mom and I purchased a condo in 2005.
I lived with her for 4 years and moved out.
The condo is her primary residence since 2005, and my primary residence for 4 years from 2005 until 2009.
We are planning to sell the condo this year.
- 1) What will be our tax liability? Assume the condo was purchased at 100K and will be sold for 200K?
- 2) Do we need to formaly document our % ownership of the condo? My mom owns majority of the property e.g. 80%
- 3) Any other areas of consideration to better manage our capital gains tax liability?
Thanks in advance.
Hi Ken,
I assume that you did not transfer title of the property to your mom after you moved out. Also, I am going to assume that you and your mom own 50% of the property each. However, you should prepare a written agreement signed by both you and your mom to document the % ownership that each of you have in the property.
Based on the above assumptions, you are eligible to claim the principal residence exemption for the years that you lived in the condo, plus 1 bonus year that the CRA automatically grants to you. If a $100,000 profit is made when the property is sold, then you can claim an exemption for 50% of your share of the gain (i.e. 7 years / 14 years). This will result in a capital gain of $25,000 ($100,000 x 50% for your share of profit x 50% PRE). If you are in a 40% tax bracket, for example, then the tax that you will pay is $10,000 ($25,000 x 40% tax rate).
Without further details, it's difficult for me to provide more specific advice.