By Myles Shane

In 2019, Canada Revenue Agency (CRA) assessed a 65-per-cent year-over-year increase in gross taxes related to real estate – some $171 million. Penalties totalled more than $57 million, which is more than double the year prior.

Recently REM spoke to Mariska Loeppky, director of tax and estate planning for IG Wealth Management, to explain why Canadians are paying more than ever before in gross taxes and penalties related to real estate.



Mariska Loeppky
Mariska Loeppky

A key point that Loeppky makes is how Canadians should appropriately report real estate dealings amid CRA’s increased analysis surrounding these transactions. Loeppky says that since 2016, CRA now requires Canadians to report the sale of their home on their tax return. “Previously, if you could claim the principal residence exemption to shelter the entire gain, you didn’t have to report the disposition on your tax return. Canadians are very aware generally if you had only one home and lived in it the entire time you owned it, you were able to shelter the gain that you realized from tax by claiming your principal residence exemption. Today you can claim this exemption by completing a T2091 with your tax return,” she says.

A taxpayer who misses reporting the sale could be subject to penalties – $100 for every month that they are late up to a maximum penalty of $8,000.

Loeppky says that CRA could ask for back-up documentation to support what’s been reported.

“Canadians can only claim one principal residence exemption for a given year for one property. Sometimes taxpayers keep their receipts for the property they purchased last or the property they think will have the bigger gain, but when it comes time to sell it makes more sense to claim the principal residence exemption for the home with the largest average gain per year and that can change over time with the market.”

She says it is imperative to keep accurate records of what you’ve paid for a property. This includes receipts for any capital improvements made for any properties you own, in order to optimize claiming the principal residence exemption.

Loeppky listed some examples that occur regularly where the tax consequences of the sale of a property may come as a surprise: “If you purchased vacant land in 2019 for $100,000 and built a home on it in 2024 for $200,000 and you sell that property for $600,000 in 2034, you will not be able to shelter all of the capital gain realized from tax,” she says. “You would not be able to claim the property as your principal residence for the years 2019 – 2023 inclusive and you would only be able to shelter the property for 12 years (11 years as principal residence plus one extra year provided for under the principal residence exemption formula) out of the 16 years that you owned it. The seller in this example would have to pay tax on a capital gain of $75,000.”

Tax issues could become prevalent when transferring property to a family member or adding a joint owner to the property, Loeppky says.

“Sometimes, taxpayers will transfer a property to a family member for less than its fair market value. This can create a double tax scenario because the transferor is considered to have sold the property at its fair market value regardless of the proceeds received. The transferee has a cost base equal to the consideration that is paid. So, if a father transfers a property with a fair market value of $300,000 to his son and his son only pays $200,000, the father will need to report the sale of the property for proceeds of $300,000 but the son when he sells it would only have a cost base of $200,000. Essentially the $100,000 difference could be subject to tax twice,” she says.

“Sometimes a joint owner is added to title of the property. If beneficial ownership is transferred, this type of transfer has tax consequences as well,” says Loeppky. “First of all, the original owner is deemed to dispose of a portion of their interest in the property at fair market value – again, there’s a requirement to report this type of transaction on the tax return for the year in which the transfer occurred. From then on, the income earned on that property must be reported by the joint owners and a gain on a subsequent sale would need to be reported by joint owners as well.

“If one of the owners dies, the property passes outside of their estate to the surviving owner, which avoids probate fees but it could also disinherit other beneficiaries as the value of the property is not part of the deceased’s estate,” she says.

17 COMMENTS

  1. Surviving owner, but it could also disinherit other beneficiaries as the value of the property is not part of the deceased’s estate,” she says.
    Hi Can you explain more about it. Thanks

  2. Rita is absolutely right. It is very important for us Realtor(R)s to know regulations/ changes in regulations that can impact our clients buying/ selling decisions. Full-time Realtor(R)s (myself over thirty years), have the opportunity of attending relevant seminars/ webinars/ reading (i.e. REM). Part timers (and/or don’t care Agents), have to take the business seriously and dedicate time. HOWEVER, we should not pretend we know it all, just because we have read somewhere the tax-implications, (or something similar). Our job is to DIRECT our clients to professionals, (just as we ask our clients to ask us professionals when it comes to buying/ selling/ leasing real estate). Similar topics are wills, continuing power of attorney, FTHBuyer’s incentives, relocation and tax implications, seller leaving country within the calendar year, etc., etc.

  3. So does this basically mean I cannot transfer a property to my kids (if I had one) without tax implications but I can give them $ 300,000 in cash without any repercussions ?

  4. I have been in Real Estate Sales for 40 years and feel that we are in worse shape here in Canada, as they keep taking rights away on a yearly basis so yes communism is not only coming it is here and will only get worse

  5. Too many assumptions and unclear supporting assumptions. Did the property value go up between 2019 and 2023? If not there is no capital gain. Have the CRA rules remained the same?
    Is the property gifted a principal residence? Was it maintained as a principal residence. If not then it’s simply an asset and is treated as such.

  6. Would you think probate taxes and capital gains on flipped and income properties would be enough to slake the beast.

  7. I’d like to know how the heck CRA decides what market value is on my principal residence if I give it to my son.

  8. Keep voting liberal – they will take care of us all till they have stripped us naked and we have nothing else left they can take.

    • Marilyn I disagree. These restrictions and requirements may help prevent further unrealistic price increases.

      • Rita, I disagree. Government restrictions and requirements will not prevent further unrealistic price increases – have never seen this happen in my nearly 40 year career. I agree with Marilyn – control by the government leads to communism!

        • Pauline

          I also have been in the industry for a long time.
          Here is an example, foreign buyers tax, this has helped curb foreign buyers flipping homes…..hence cooling off of BC and to some degree TO escalation of runaway prices.
          The Gov’t monitors the market and introduces necessary rules and regulations that ensure stability for home owners and the real estate market. I’m surprised you don’t understand that.

  9. Great information.
    Tax implications on purchase and sale are becoming more complex. It is best to consult an accountant, and your lawyer should be able to give good insight. Best to hire a professional than navigate yourself.

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