In my research I read that if you inherit something there is no inheritance tax in Canada.
Does the above rule apply to the following situation?
One of two brothers decides to take over the house from their parents (who are still alive). The parents will gift their house to the brother who wants the house and the other brother gets 50% of the house price in cash (payed from the brother who received the house).
The brother who received the cash, is he obligated to pay tax for it or is that considered as a heritage? (he lives in Canada).
Thank you for your thoughts on this!
Have a nice evening,
Rather than asking a question like this on a public forum, consult a tax and legal professional. This is not an appropriate location for obtaining significantly detailed information like that you are seeking - particularly in the absence of necessary facts.
A typical taxation II textbook case.
Inheritance means you get something as a result of someone DYING. If a living person gives money to another living person, there are other laws that govern the transaction, but it has nothing to do with inheritance.
Interesting that you say that. The term living inheritance is not something I made up, it is an official term (e.g. here).
From what I read, in Canada, cash gifts are not considered income (the situation is different if it is a capital property or if the gift came from an employer).
LOL. Ok, I stand corrected. But, your original question was about “inheritance tax” - which is not something defined in the income tax act. Personally, I had never heard the term “living inheritance” before. And the dictionary definition of “inheritance” is “money or objects that someone gives you when they die.” See:
There’s no use quibbling over the term “living inheritance”. Canada Revenue Agency would view it as a gift “inter vivos” (“between lives” meaning between living individuals). In any case the rules for gifts, bequests and inheritances are effectively the same, as provided in paragraph 69(1)(c) for most cases: the donor is deemed to have disposed of the property at fair market value and the donee is deemed to have acquired it at a cost equal to the same amount. There is no inheritance tax or gift tax in Canada (but watch out for land transfer tax which is a provincial - and for Toronto municipal - matter.
The donor or estate, as the case may be, will be responsible for income tax on any taxable capital gain arising from the deemed disposition.
Thanks guys, always good to hear your input.
I am aware that my “media language” does not comply with the CRA language…
I am a beginner and you can clearly see how different our minds work…But it was actually a good lesson…
Note that the Income Tax Act - and law in general - uses very specific and very detailed language. Questions should ALWAYS be asked with this in mind. “Media language” does not cut it - in an informal forum or in a professional one.