Joint Ownership, Capital Gains, and Income Tax
Posted In: Entrepreneurial Wealth Management

Joint Ownership, Capital Gains, and Income Tax


Executive Summary

It’s cottage season again and many owners are looking for ways to avoid the inevitable tax that will be levied when their valuable and cherished family cottages transition between generations.

Many believe that there is a way to absolutely and completely avoid paying tax.  These same ‘many’ refuse to believe that CRA hasn’t seen every trick in the book . . . and removed the loopholes.

The super-rich may park their money off-shore, failing to declare its existence and any income it may generate, but not so for those Canadians who travel in coach, not on a private jet.

The best advice to transfer a cottage at the lowest rate of tax possible is to engage an accountant and lawyer who specialize in this specific activity. To one whom you not only trust, but one who has experienced this transaction and CRA’s tactics first-hand.


What you need to know

If you attempt to skirt tax laws by placing an adult child on the title to the cottage, that they will one day inherit, and expect that CRA will not expect taxes to be paid, then you are more optimistic than financial experts!

Transferring ownership, even partial ownership could trigger a deemed-disposition and capital gains tax NOW.

Selling the cottage for a reduced (falsified amount like $1) could result in the actual tax being levied now, triggering penalties equal to the amount of the tax owed, and interest from the date the transaction ‘occurred’.  And the new owners will have to use $1 as their purchase price when they eventually sell or transfer the cottage.  The last point is certainly double-dipping, but CRA doesn’t seem to mind!


Bottom Line

Consult a lawyer and accountant before starting this process, not a dockside tax expert in Bermuda shorts and an old golf shirt.

If you would like a recommendation, don’t hesitate to give me a call.


Chat soon,


Jeff Devlin, CFP (2010-2022)

Elementus Wealth Management Inc.


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