Expert: Cinzia Dalgarno - 6/30/2009

Question
Hi,
I apologize if this is not your area of expertise but I thought I would ask you the question anyways as I really need help with this. I am writing on behalf of my mother and it has to do with her personal residence (Alberta). She bought the residence about 12 years ago under her company name and she has lived in the residence ever since. I believe it was bought in her company name as at one point (early on after purchase) there were dividends being drawn  by the company. The house was purchased for about $80,000 and today would be appraised for approximately $200,000. We have been told that because it was purchased in her company name and even though it is her personal residence that there will be capital gains tax to pay at some point when the residence is sold. She is now thinking about changing the title to her personal name. If capital gains will be an issue, will they have to be paid when title is changed (even thought she will remain living there as a personal residence) or will they be due once the house is sold outright? Thank you kindly for your time.

Answer
Hi Kevin. You're right, of course...my expertise lies in all things mortgages...but I've checked with a solicitor, who has given me this info, without prejudice:
It's best to ask a tax accountant in Alberta but my understanding is that a company cannot have a principal residence exemption so capital gains will accrue from the time of purchase to the date of transfer to your client's personal name. I believe the company will report the disposition of property on the corporate tax return. Your client will enjoy the principal residence exemption from the date of ownership until disposition, so long as it is her principal residence, otherwise she would be exempt for those years that it was her principal residence.

Hope this was helpful to you,
Warm regards,