Taxpayer said father 1% owner on paper but they (taxpayer) received all funds
TRUST LEDGER STATEMENT:
$442,000 paid to Taxpayer
$38,000 paid to father
Note: Property initially principal residence for taxpayer but shortly after purchase turned into rental property - they moved into another home (change of use and new cost base is FMV @ date of change). According to taxpayer and verified by their realtor property didn’t change in value in that short period (Purchased 2013 - rented 2014).
I don’t know if you can assume the father’s share of the sale is 38,000 just because the trust ledger statement shows a 38,000 payment to the father. Maybe the father held a note or loan that was paid out of the proceeds. If the trust ledger statement showed 200,000 paid to the Royal bank that doesn’t mean the bank should be reporting part of the sale.
If the father was on title for 1% and a payment to him represented 38,000 of the proceeds then that would mean the sale price was at least 3.8 million?
I think the logic regarding pro-ration may be flawed. The father may not even be a beneficial owner depending on the circumstances on why his name was registered on title. Maybe he was on title as a co-signer merely as a condition of financing… bare trust relationship.
This. @snoplowguy guy is absolutely correct, and you need consider where the beneficial ownership of the property is. You’re about to stick a $38k capital gain on a guys return where he may not necessarily be entitled to that income…
Paragraph 2.81 In determining whether a person has beneficial ownership, one should consider such factors as the right to possession, the right to collect rents, the right to call for the mortgaging of the property, the right to transfer title by sale or by will, the obligation to repair, the obligation to pay property taxes and other relevant rights and obligations.
Facts re taxpayer:
Paid down payment
Lived in condo (use and benefit of the property)
Then rented it out and collected rent (kept all the rent payments)
Handled mortgage and made payments
Was the one who decided when to sell
Paid for all repairs, maintenance, and property taxes
Yes, correct - co-signer because taxpayer was self employed
In the event this is a bare trust relationship I have read:
The new trust reporting requirements are applicable to trusts with taxation years ending after December 30, 2023.
Therefore, there would be no reporting requirement.
As for CG based taxpayer’s beneficial ownership - total capital gain goes to them and none to father. Do either of you@snoplowguy@Deepinthemoneycallsee it differently?
@ DeepinthemoneycalWhat’s so contradictory? This is a bare trust clear as day.
The conveyancing lawyer didn’t seem to think so when he read the legal documentation
(which has not been fully uploaded to protaxcommunity.com to read)
Along the lines of what @abechew309 said, do you (@healthymanccc ) want to be liable for making the decision of what amount of income should be attributed to whom? If you get it wrong, the client can blame YOU. The legality of the situation should be determined by someone qualified to do so. The accounting and tax treatment should follow from the legal documentation. If the documentation you have doesn’t unequivocally indicate who should report what, send the client back to the lawyer to get further documentation. Better yet, get together WITH the lawyer AND the client to hash it out.
You do understand the distinction between legal title and beneficial ownership don’t you? It doesn’t matter what the lawyer thinks it is. The lawyer is primarily concerned with formalizing the legality of the arrangement. For income tax purposes, the CRA is only concerned with beneficial ownership attribution (regardless of what type of arrangement exists). If the answer was to always follow the formalities of what’s on paper (which really should only be the foundation that gives any basis todetermining where the attribution lies), then attribution provisions would never be the just cause of determining where the liability lies from a tax perspective.
I stand by my interpretation firmly. This is coming from my experiences having been witness to many various tax interpretation hearings in BC provincial court of appeals.
Yet another reason why we have engagement letters.
I think we have to disagree - the Law Society of whichever Province this is in would surely have a different opinion on that - and also on their postings to their Trust account.
Possibly we could agree that internet postings do not form a solid basis for supporting working papers of a tax position.
Again, I’m not sure what your basis is for referring over to a lawyers civil trust. You are failing to distinct between legality and taxation. We are discussing taxation attribution here … right?
There have been so many contradictory “facts” here - these two taxpayers should visit with their lawyer before visiting with their accountant 
