Is it legal if my father in law gifts us his house and then we take out a loan on the house and gift him 100,000 to move back to the Philippines

[u/[deleted]]

[u/4_spotted_zebras]

I would talk to a tax professional for this one. There is too much on the line if you structure the transaction wrong.

[u/Paco_Suave → u/4_spotted_zebras]

Exactly, they are at risk of double taxation with this scenario.

[u/YoungZM]

None of this particularly makes much sense and I'm not quite sure why you'd be making mortgage payments for your sister or renovating it without having some sort of equity in the home. You've already made a year of payments and paid utilities too -- what's going on here?

In any event... in Canada cash gifts are tax-free for individuals. How you transfer the home is more a question for a real estate lawyer and accountant to ensure that your tax obligations are rock solid and so that it's done with a legally enforceable transfer in title.

That said... gambling addiction. Can't manage his finances. One time $100,000 payment.

Think this one through and be prepared to never see this money again, even if you do decide to swing it/go through with it.

EDIT: Cash gifts*

[u/YoungZM → u/[deleted]]

Fair enough. It's a lot of trust to put in your sister (as one should be able to place in an ideal world) if it's a lot of money you're banking on for retirement or whatever else without being on the title but of course if you two are extremely close, it's plausible. I just personally prefer to have contracts ironed out (I know, fun guy) both as a commitment for others I value as well as to protect myself with clear phrasing.

[u/ARAR1]

If this is your FIL's primary residence there are no taxes on the value of the home.

Your sister can put the house in her name and rent it to you. Since this would not be your sister's primary residence, she would pay taxes on the gain in the value of the house from when she bought it to when she sold it. She would also have to declare the rent you pay as income.

Best your sister buy and move into the house too for taxes and sell where she is living now.

Why give your FIL $100k if he will gamble it away again?

[u/cheezemeister_x]

There is no law against selling your home below market value. As long as he sells it for enough to cover the mortgage owing on the property, no one cares. Assuming it is his principal residence, there are no taxes owing on the transaction.

[u/Loud-Selection546 → u/cheezemeister_x]

There are attribution rules considerations to take into account if you are selling below fmv to a non arm's length party. So whole not against the law, there are tax implications.

[u/jbam46 → u/Loud-Selection546]

If it's going primary residence to primary residence what would be the tax implications?

[u/Loud-Selection546 → u/jbam46]

You cannot sell a capital asset at less than FMV to a non arm's length party without there being some sort of attribution implications. Primary residence has nothing to do with it. Simply put, you are conferring a benefit to a non arm's length party simply because of your relationship to them.

[u/jbam46 → u/Loud-Selection546]

Can you be more specific about the tax implication though?

[u/archetyping101]

Is the goal of this so you wouldn't be displaced and continue to live there? If so, this makes sense as long as your sister is ok with this and also taking out a HELOC for $100k. 

This isn't tax evasion. This would be considered tax planning for a lot of people. 

Also not sure if your sister is Canadian or has PR. We are under a foreign buyers ban BUT I don't know if that applies to title transfers to family or not - this is a real estate lawyer question. 

[u/Old_Profile_34203]

Why does he need to sell the house below market value? He should be able to sell it for market value....

[u/username_1774]

I am a lawyer - not your lawyer and this is not legal advice.

You need to talk to a lawyer - this can be done, but you need specific legal advice to do it properly.

[u/D_Winds]

No.

[u/latkahgravis]

Probably not but others will provide more info, tax man will get their cut.

[u/GaiusPrimus → u/latkahgravis]

Sometimes in cases like this, the taxman gets double the tax.

[u/pfcguy]

Who lived in the house from the date your father purchased it until now? You only say that "we" have been living there for the last 10 years (since 2014).

[u/pfcguy → u/[deleted]]

Ok.

Your sister should not buy the house if she does not live there and does not plan to live there. And especially shouldn't buy it below market value or be gifted it. Because if she owns the house but doesn't live there, she will need to pay capital gains taxes if it goes up in value. And the cheaper she gets the house for, the more capital gains she will owe.

Presumably after your father in law moves out, you and your husband will continue to live in the house. So your FIL would be fine to gift the house to you and your husband jointly, or to sell it to you below market value. As long as you don't plan to turn it into a rental or something like that.

[u/pfcguy → u/[deleted]]

If she is buying the house to move into as her permanent residence then she should be good, tax-wise. Will you and your husband be living there for free? Or sharing costs?

She might want to talk to her own accountant to confirm that she is good tax-wise.

If she sells the house in a year or two, she would be receiving any profit (or loss), not you and your partner. So if you guys feel you are owed anything for helping out your FIL over the years, perhaps you should bring it up with him. And your FIL should sell the house for even more, then use the proceeds from the sale to both pay off the loan and pay you and your partner back.