When transferring the legal title of a property to a family member, a
disposition for tax purposes may not necessarily occur. The taxable event
would occur when a “beneficial ownership” change happens. Usually, a
beneficial change and legal change are one in the same, but not always.
In a June 14, 2016 Technical Interpretation, CRA examined the situation
where a married couple transferred the title to a property and mortgage into a
parent’s name because they no longer qualified to refinance the original
mortgage. Once their financial position improved, they transferred the title
back. The original taxpayers continued to make all mortgage payments and other
house costs. They also continued to live in the dwelling throughout the legal
transitions.
The CRA opined that despite the legal ownership changes, no beneficial
ownership change occurred. Therefore, there was no taxable disposition.
Action Item: Since the taxability of such a transaction is a matter
of interpretation, caution should be taken when relying on such a position.
Discuss your fact pattern with a professional and be sure to document
appropriate support.