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Legal Ease
Legal Ease, Lawyer
Category: Canada Tax
Satisfied Customers: 99931
Experience:  I have been a lawyer since 1985 and have been a professional on this site for 5 years.
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My mother in law died in 2009 whilst living in British Columbia.

Customer Question

My mother in law died in 2009 whilst living in British Columbia. From around 2010 my husband and his sister, who is resident in BC, rented out their mother's apartment. Now my husband wants to raise his share from the property and his sister wishes to buy him out. I have already ascertained from this site that he will not have to pay capital gains on the property as the value at the time of his mother's death was higher than the agreed value now.
His sister is now suggesting that my husband has to pay income tax in Canada on the share of the profit that he has received from the rental. He receives a cheque from his sister on a monthly basis which reflects his half of the rental profit. My understanding is that as he receives this money, it needs to be declared in UK as part of his taxable income. In other words his responsibility to pay tax in UK not Canada.
Can you confirm this?
Another issue that has arisen is that his sister says that she cannot raise a mortgage on the apartment until the property is transferred into her name. I imagine what she is describing is as when a property is sold and bought in UK, that the mortgage money is only released to him once the legal transfer is made. In other words an instantaneous transaction which protects both sides. My husband does not release his half of the property until the mortgage company releases the money directly to him! Could you confirm please.
His sister is giving the impression that my husband has to transfer the property to her,she then receives the money from the mortgage company and pays my husband, but along the way I guess she is hoping to make some cash out of the deal. But that way there is no protection for my husband's interests. Can you help with this?
It is clear that we will need legal representation who knows Canadian law etc who can work to protect our interests, how do we find that help?
Many thanks
Submitted: 2 years ago.
Category: Canada Tax
Expert:  Legal Ease replied 2 years ago.
His sister is correct and tax has to be paid in Canada on any money earned in Canada. In fact it should have been deducted at source. He would not have the property transferred out of his name until be is paid. This would all be done through the lawyers with money going into Trust accounts, using certified cheques etc.The way your husband's interests are to be protected is for him to have a real estate lawyer acting for him.You can contact the BC Branch of the Canadian Bar Association and use their Lawyer Referral Service. You will be given the name of a lawyer and can consult with the lawyer and the first half hour will be $25. The number is:(###) ###-####or 1.***-***-****.
Customer: replied 2 years ago.
now my husbands sister is saying that even though the apartment has decreased in value since their mothers death the tax dept in Canada will take 25% of any money he is paid by his sister for his share of the apartment and that it would take a long time for this money to be returned to him once the tax dept is happy that there is no 'capital gain' on the property since his mothers death in 2009.
So what I am asking will 25% of the property value be taken even though the property has decreased in value between 2009 and 2015 and then it would need to be paid back to him. How long would it take to get back any deducted tax?
Expert:  Legal Ease replied 2 years ago.
They withholding tax is what you are referring to and it is generally on the gain. So if an accountant does this correctly there may not be an withholding tax.Otherwise there would be at the time of the sale but then as soon as a tax return is filed it would be returned and that can be done very quickly.

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