Excluded Owner

If daughter, her father and her mother are on title of a Rental property (apartment), Do they need to file UHT return?
Excluded owners have no underused housing tax filing obligations. A homeowner is an excluded owner if on December 31st a homeowner is:

  • An individual that is a Canadian citizen or a permanent resident of Canada (except where the individual holds an interest in the property as a partner of a partnership or as a trustee of a trust).
    As defined above, will they be consider partner of a partnership? or there should be a registered partnership requires?
    Any expert advise will be appreciated.

It’s not unusual for a parent to be on title for a minor interest in a property to secure financing. I’ve advised clients that, in such a situation, the parent(s) could be seen to be holding their interest in the property in trust for the child and therefore should likely file the UHT return. Your question doesn’t give enough information to determine whether someone needs to file the UHT return.

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My understanding is that it is well established that partnership is the relation that subsists between persons carrying on a business in common with a view to profit - those very words appear in section 2 of the Partnerships Act (Ontario) and I would wager that most, if not all, common law jurisdictions use substantially the same definition.

I understand also that it is equally well established in Canadian tax law that real estate rental (other than short-term rental) per se does not constitute a business unless it includes the provision of services beyond basic ones such as heat and light, parking, and laundry facilities. Examples of services that might indicate the existence of a business are cleaning, security, and food service.

My conclusion: If a particular rental operation does not constitute a business, the relationship between two or more co-owners does not constitute a partnership.


@keith1 your conclusion “If a particular rental operation does constitute a business” …should it not be “If a particular rental operation does not constitute a business”?

Yes - I have corrected my earlier reply.

one more question related to this. As UHT reads as underused housing tax, is this mean if the residential property is on rent 100% (not vacant) for all year around, still the landlord needs to file UHT return? or it is only for the owners of the vacant property?

Affected owners need to file even though no tax is payable.

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Just to be clear, if the two people on title for the rental property merely claimed Rental Income & Expenses on the T776 (not a business expense on the T2125), my understanding is they would be excluded from filing the UHT. Is this correct?

@kozakworld, I think you are right. I called CRA today and the agent failed to explain or didn’t want to explain the definition of partners in partnership. The agent said that as per supreme court’s order in 2001, partnership must be defined by the provincial act not federal act. This UHT form is very complicated as compared to the provincial form for vacant property in BC.

Wow! I’m glad I came across this post! I just received an email from taxtips.ca that says " if you are the joint owner of a residential rental property, and the rental income is reported jointly - UHT return is probably required". I had a sudden panic attack! But I think Keith is correct. It’s all in the classification… are they carrying on a business with view to profit? And does the T776 classify them as “Co-owners” or “partnership”? I think the latter is a pretty important determining factor.

TaxTips: Avoid $5,000 penalty re UHT Return due Oct 31st - this affects Canadians!! (mailchi.mp)

I would also add that the CRA updated it’s website on Sept 29th with questions about Partnerships Questions and Answers on the Underused Housing Tax - Canada.ca

That is exactly what we (accountants) have been asking CRA for almost a year now, and CRA won’t give a clear answer. There have been many discussions about it here on this forum (see below, for example). CRA has held webinars, and posted FAQs on their website, and sent representatives to talk about it at various conferences and groups (PBA, CFIB, Chamber of Commerce, etc), but they refuse to state unequivocally what is or is not a partnership for the purpose of the UHT filing. So, use your professional judgement, and cross your fingers. We will get an answer eventually…from the TCC or parliament (if enough people complain to their MPs about it…)

My MP reminds me of slow grazing cattle… drives me loco! :slightly_smiling_face: