The Tax Issue
I live in Quebec and I purchased a home in 2000. At the time my income would not support the mortgage and therefore my father signed with me and is named as 50% owner. He has never lived at this residence and doesn’t own any other properties. I have made all the mortgage payments myself and have been the only one to declare any personal taxes on it. I have been approved for a new mortgage and he would like to transfer back 50% of the property back to me. Will he be subjected to capital gains tax after he transfers the home to me or is there a way for us to override this. No one seems to have this answer.
At some point in their lives most Canadians will sell their home. Generally speaking the sale of your home is tax-free because we have a deduction known as the “principal residence” exemption. A principal residence is defined as a home in which either you, your spouse or your child ordinarily lived in.
So, the answer to the question is that the 50% interest that your father owned in your home qualifies under the definition of principal residence because you, his child, lived there.
As long as he doesn’t have any other home that would qualify for the period in question, he can claim the exemption on the transfer of his share of the home back to you.
You should also refer to my previous post on the topic of whether he needs to file the necessary forms on his income tax returns for the year.