Tag: capital gains
As it is Valentine’s Day, our discussion today will consider, naturally, love and affection.
Real property can be gifted to loved ones. If there is no consideration of monetary value, then there will be no Land Transfer Tax payable on the transaction. In the Land Transfer Tax Affidavit, which must be filed when any transfer is registered in Ontario, the transfer is said to be for “natural love and affection”.
Although not specifically exempt from taxes, a transfer for “natural love and affection” is considered to be a transfer for nil value, and therefore, no Land Transfer Tax is payable.
“Love”, as most poets know, is hard to define. There is no definition in the tax legislation. Further, it is not clear what “unnatural” love or affection is.
In certain cases, gifts to non-arms’ length parties may also not attract Land Transfer Tax. For example, a gift to a charity may not be subject to Land Transfer Tax.
If the gift includes the assumption of a mortgage or other liabilities by the receiver, then the value of the mortgage or liability assumed by the receiver is of value to the donor, and must, in most cases, be included in the Land Transfer Tax Affidavit. Land Transfer Tax will be payable on the value of the mortgage or liability assumed. I say “in most cases” because there is an exemption where the transfer is between spouses or former spouses: see R.R.O. 1990, Regulation 696.
Further, if the receiver is not a spouse and the land was subject to a mortgage that was paid off by the receiver, Land Transfer Tax will be payable on the value of the mortgage paid off.
When gifting real property, keep in mind that while Land Transfer Tax may not be payable, this does not mean that income taxes are not payable. In many cases, the gift will trigger a deemed capital gain on the part of the donor.
For more information, see the Ontario Ministry of Finance bulletin, here, and the Government of Ontario publication, “A Guide for Real Estate Practitioners: Land Transfer Tax and the Registration of Conveyances of Land in Ontario”, here.
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I try to seize every opportunity I can to learn about art. In preparing today’s blog, I was intrigued to read about the UK’s Cultural Gifts Scheme and its relationship to estates.
The Cultural Gifts Scheme & Acceptance in Lieu allows UK taxpayers to donate important works of art and other heritage objects in return for a tax reduction, which includes inheritance tax. The donated work is then held for the benefit of the public or the nation at an eligible museum or gallery. According to this article from the Guardian, the Scheme was first introduced in 1910 as a way of allowing individuals to offset inheritance tax bills, and later, in 2013, to allow individuals to be able to make donations during their lifetime in order to offset future tax liabilities.
Any art admirer should have a look at the 2018-2019 Annual Report which provides a list of items that were received, along with some pretty pictures of the items :). It is a feast for the eyes and the senses. Some of the highlights include:
- a Portrait of the Emperor Charles V by Peter Rubens, which has gone to the Royal Armouries in Leeds
- a platinum and diamond necklace with black velvet ribbons, convertible to a brooch, made by Cartier in Paris c. 1908-1910, which has been allocated to the Victoria and Albert Museum
- 361 botanical drawings by the illustrator Florence Helen Woolward
- Bernardo Bellotto’s painting of Venice on Ascension Day, which settled £7 million of tax
- Damien Hirst’s Wretched War sculpture, given by the artist’s former business manager Frank Dunphy settling £90,000 in tax
In Canada, although art can be subject to capital gains, and possibly other taxes, it is possible for a donor to limit, or avoid the tax altogether, including by way of claiming a charitable tax credit. Individuals thinking about estate planning and/or donating art should seek the advice of a professional advisor to maximize the amount of savings.
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With his election victory in the not too distant past, President-elect Donald Trump is receiving extensive coverage in the media. Although the issues following him vary widely, as we at Hull & Hull LLP are estates lawyers, our focus is on the effect the President-elect is having in the estates community.
US Estate Tax
As previously blogged by Hull & Hull LLP, the President-elect is considering abolishing estate tax in the United States altogether. This is a departure from the current US model which sees married couples exempt for the first $10.9 million in their estate, with any surplus amount being taxed at 40%. In relation to this current model, recent polls suggest that in 2015 only 10,800 estate returns were filed with about half of those being taxable.
No date has been set for the anticipated repeal.
As well, the President-elect seeks to change capital gains owing at death such that if capital gains are held until death and valued under $10 million, they will not be taxed. Apparently, the rationale is to support small businesses and family farms.
As a result of this change, it is predicted that beneficiaries of large estates will be able to avoid paying capital gains on the inherited asset if they do not sell what they inherit. They can wait to pay the tax when there is an opportune time to do so. Otherwise, those beneficiaries who are in ready need of money, will have to sell the asset, thereby triggering the tax owing.
As a result of the changes to estates and capital gains tax, pundits predict the dawn of dynastic wealth (i.e. monetary inheritance that is passed on to generations that didn’t earn it) in the United States of America.
Now, given what we have learned about the President-elect’s platform regarding estate tax and capital gains tax, consider meeting with a professional advisor to ensure your estate plan is up to date.
Find this topic interesting? Please also consider these related Hull & Hull LLP Blogs:
- Blind Trusts – Who Controls Donald Trump’s Assets While President?
- Estate Issues for Americans to Consider Before Moving North
- S. Inheritance Tax Deductions for Surviving Spouses
Listen to "The Family Cottage and Capital Gains Taxes"
Read the transcribed version of "The Family Cottage and Capital Gains Taxes"
This week on Hull on Estate and Succession Planning, Ian and Suzana discuss different options for dealing with capital gains tax as it pertains to investments like ‘The family cottage’.
Listen to "Capital Gains Taxes"
Read the transcribed version of "Capital Gainst Taxes"
In this week’s episode of Hull on Estate and Succession Planning, Ian and Suzana talk about capital gains taxes and what you need to know about them relating to the family cottage.
READ THE TRANSCRIBED PODCAST HERE
During this podcast, Suzana discussed the type of taxes that arise on death and suggested ways to defer or reduce each of them:
(i) capital gains tax;
(ii) tax on RRSP and RRIF assets; and
(iii) probate fees Suzana then discussed other tax reduction strategies as well. ——–