# Principal Residence Exemption: Joint Ownership (Mother, Son) **URL:** \ **Category:** Tax Topics\ **Created:** [March 22, 2023, 12:22am UTC](https://www.protaxcommunity.com/t/principal-residence-exemption-joint-ownership-mother-son/6769 "2023-03-22T00:22:27Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![kozakworld](https://sea2.discourse-cdn.com/flex016/user_avatar/www.protaxcommunity.com/kozakworld/32/1594_2.png) [@kozakworld](https://www.protaxcommunity.com/u/kozakworld)\ **Post date:** [March 22, 2023, 12:22am UTC](https://www.protaxcommunity.com/t/principal-residence-exemption-joint-ownership-mother-son/6769/1 "2023-03-22T00:22:27Z")
Mother and adult son purchase new home together. Both names are on title and both live in the property the entire time. Special clause in the Will stating that the house is excluded from the Estate and is passed on to the son at death. Mother passes away and son has full ownership of the property. Executors of the estate do not include the house in closing the estate. On the mother’s Final Return, does mother have to declare the disposition of her share of the property? I have mixed thoughts (yes/no) but want to confirm other thoughts on this. Income Tax Folio S1-F3-C2, Principal Residence discusses the transfer between spouses (Subsection 40(4) inter-vivos) where it doesn’t need to be reported. I don’t see any discussion about mother/child transfers or third party transfers where both are on title and both lived in the residence the entire time. Any thoughts? ---
**Author:** ![kevin](https://avatars.discourse-cdn.com/v4/letter/k/2acd7d/32.png) [@kevin](https://www.protaxcommunity.com/u/kevin)\ **Post date:** [March 22, 2023, 12:30am UTC](https://www.protaxcommunity.com/t/principal-residence-exemption-joint-ownership-mother-son/6769/2 "2023-03-22T00:30:26Z")
Yes, it must be reported as a disposition by the mother. Otherwise, no one would ever pay tax on their capital gains on death. They would just put their stuff in some form of joint ownership. That clause in the Will about excluding the house from the Estate sounds a bit shady. As far as I’m aware, whether something passes to the Estate upon death depends on ownership of the asset immediately before death. You can exclude beneficiaries from accessing the value of certain Estate assets but you can’t exclude assets from the Estate just with a statement in the Will. ---
**Author:** ![kozakworld](https://sea2.discourse-cdn.com/flex016/user_avatar/www.protaxcommunity.com/kozakworld/32/1594_2.png) [@kozakworld](https://www.protaxcommunity.com/u/kozakworld)\ **Post date:** [March 22, 2023, 1:04am UTC](https://www.protaxcommunity.com/t/principal-residence-exemption-joint-ownership-mother-son/6769/3 "2023-03-22T01:04:27Z")
Thanks for your quick reply, @kevin - being our busy season, I wasn’t expecting a reply this fast! I tend to agree, that it should be reported. That would mean assessing the FMV on death for her 50% share of the property, and only reporting her share since the son didn’t sell his share of the property. Is this a correct interpretation? The Will was prepared by the mother’s lawyer, and the Executors used this same lawyer to apply for Probate. When they purchased the home together, the mother was already up in years and was considering an independent living placement but didn’t have the means to afford it with only OAS and CPP income. The son decided to buy the home so the mother could move in with him and still be with family. I believe the son also needed a co-signer on the mortgage due to other debts he had, so they both went on title. I believe the son paid all the expenses for the property, including the mortgage, and the mother basically just lived with him. So I think that’s the reason why the lawyer agreed to draft the Will in this fashion. ---
**Author:** ![snoplowguy](https://sea2.discourse-cdn.com/flex016/user_avatar/www.protaxcommunity.com/snoplowguy/32/2535_2.png) [@snoplowguy](https://www.protaxcommunity.com/u/snoplowguy)\ **Post date:** [March 22, 2023, 12:08pm UTC](https://www.protaxcommunity.com/t/principal-residence-exemption-joint-ownership-mother-son/6769/4 "2023-03-22T12:08:07Z")
If the house was registered between the mother and son as joint tenants rather than tenants in common then the house passes automatically to the son. The statement in the will may just be there to make her intentions clear to any other beneficiaries. There have been some successful court cases initiated by estate beneficiaries challenging situations where a parent had made an asset (such as a bank account) joint with another beneficiary. If the mother doesn’t own any other real estate that would be considered her principal residence then reporting her share of the deemed proceeds on death and claiming the PRE shouldn’t be a big deal, other than as you mentioned obtaining a value for the property. ---
**Author:** ![PDot](https://avatars.discourse-cdn.com/v4/letter/p/87869e/32.png) [@PDot](https://www.protaxcommunity.com/u/PDot)\ **Post date:** [March 22, 2023, 3:34pm UTC](https://www.protaxcommunity.com/t/principal-residence-exemption-joint-ownership-mother-son/6769/5 "2023-03-22T15:34:14Z")
I agree with snowplow guy, especially after you explain the situation leading up to the purchase of the house. Intentions of true joint ownership seem to be implied ---
**Author:** ![kozakworld](https://sea2.discourse-cdn.com/flex016/user_avatar/www.protaxcommunity.com/kozakworld/32/1594_2.png) [@kozakworld](https://www.protaxcommunity.com/u/kozakworld)\ **Post date:** [March 22, 2023, 4:38pm UTC](https://www.protaxcommunity.com/t/principal-residence-exemption-joint-ownership-mother-son/6769/6 "2023-03-22T16:38:13Z")
> [@snoplowguy](#): > > If the mother doesn’t own any other real estate that would be considered her principal residence then reporting her share of the deemed proceeds on death and claiming the PRE shouldn’t be a big deal, other than as you mentioned obtaining a value for the property. I agree that it shouldn’t be a big deal to include the T1255 other than obtaining a property value. The executor, on the other hand, doesn’t fee the T1255 would be required since the property is passed directly to the son. Would it be wrong to not file the T1255? We don’t file the T1255 when the property passes to a surviving spouse (right of survivorship). Would this situation have similar treatment where the T1255 wouldn’t be required? ---
**Author:** ![snoplowguy](https://sea2.discourse-cdn.com/flex016/user_avatar/www.protaxcommunity.com/snoplowguy/32/2535_2.png) [@snoplowguy](https://www.protaxcommunity.com/u/snoplowguy)\ **Post date:** [March 22, 2023, 5:37pm UTC](https://www.protaxcommunity.com/t/principal-residence-exemption-joint-ownership-mother-son/6769/7 "2023-03-22T17:37:32Z")
I think the executor’s “feeling” is incorrect. As Kevin noted, if all it took was to have a property registered in joint names in order to avoid reporting a disposition, nobody would ever pay capital gains on death. What if the property was not the mother’s principal residence? > [@](#): > > If the deceased owned (or co-owned) property that was their principal residence, there is a deemed disposition of the property on death. For deaths occurring in 2022, a principal residence designation must be made by completing page 2 of Schedule 3, Capital Gains (or Losses) and Form T1255, Designation of a Property as a Principal Residence by the Legal Representative of a Deceased Individual. > > Where the principal residence is transferred to the deceased’s spouse, common-law partner, or testamentary spousal or common-law partner trust (under the conditions described in the next section), the CRA does not require you to make a principal residence designation for the period before death. Instead, the disposition must be reported and the designation may be made by the surviving spouse, common law partner, or the trust at the earlier of the time of actual disposition or death of the surviving spouse. Therefore, a record should be kept of the years for which the deceased individual would have been eligible to make a principal residence designation for the particular property. ---
**Author:** ![kozakworld](https://sea2.discourse-cdn.com/flex016/user_avatar/www.protaxcommunity.com/kozakworld/32/1594_2.png) [@kozakworld](https://www.protaxcommunity.com/u/kozakworld)\ **Post date:** [March 22, 2023, 6:21pm UTC](https://www.protaxcommunity.com/t/principal-residence-exemption-joint-ownership-mother-son/6769/8 "2023-03-22T18:21:38Z")
Thank you, @snoplowguy … Appreciate the clarity and fully agree. I will seek info on FMV at death and mom’s share of the property (? 50%) to claim on the T1255. ---
**Author:** ![kozakworld](https://sea2.discourse-cdn.com/flex016/user_avatar/www.protaxcommunity.com/kozakworld/32/1594_2.png) [@kozakworld](https://www.protaxcommunity.com/u/kozakworld)\ **Post date:** [April 7, 2023, 3:08am UTC](https://www.protaxcommunity.com/t/principal-residence-exemption-joint-ownership-mother-son/6769/9 "2023-04-07T03:08:18Z")
A further follow-up question: We filed the Final Return and included the T1255 showing the mother’s 50% share in the joint tenancy property (mother & adult son, where the property was both the mother’s and the son’s principal residence for all years they owned the property together). I’m about to file a T3 Trust for the estate. We know that on death of a joint property tenant, their share of the property flows directly to the surviving joint tenant (mother’s share goes to son). With the new legislation on Disposition of Principal Residences, does CRA require this be reported on a T3 Trust as well? In this case, the deemed disposition is flowing first to the Estate at FMV, then from the Estate to the son, with Proceeds of Disposition by the Estate = FMV, thus GAIN = NIL. Does this need to be reported on Schedule 1? Or, does form T1079, “Designation of a Property as a Principal Residence by a Personal Trust” need to be completed? Page 39 in the T3 Trust guide (T4013) under the heading “Principal Residence” seems to suggest it’s required. Thought it beneficial to get some input. ---
**Author:** ![lokki](https://avatars.discourse-cdn.com/v4/letter/l/4da419/32.png) [@lokki](https://www.protaxcommunity.com/u/lokki)\ **Post date:** [April 7, 2023, 6:25am UTC](https://www.protaxcommunity.com/t/principal-residence-exemption-joint-ownership-mother-son/6769/10 "2023-04-07T06:25:34Z")
If the principal home is jointly owned by the mother and son under Joint Tenancy, it will not form part of the estate, no probate will be required, and it should not be reported on a T3 trust return. However, if the principal home is owned under Tenancy in Common, the mother’s 50% share will become part of the estate, probate will be required, and it should be reported on the T3 Trust return. ACB equals FMV at death, and when the title passes to the son, the proceeds will be the same amount (FMV at death), resulting in no capital gain or loss. Regardless of whether it is Joint Tenancy or Tenancy in Common, the 50% share should be reported on the mother’s terminal tax return and designated as the principal home with no capital gain to be paid. ---
**Author:** ![lokki](https://avatars.discourse-cdn.com/v4/letter/l/4da419/32.png) [@lokki](https://www.protaxcommunity.com/u/lokki)\ **Post date:** [April 7, 2023, 6:38am UTC](https://www.protaxcommunity.com/t/principal-residence-exemption-joint-ownership-mother-son/6769/11 "2023-04-07T06:38:09Z")
If mom owns 50% under tenancy in common, report the disposition on T3 return schedule 1 under “Personal-use property”. Proceeds = ACB, Capital Gain = 0.00 T1079 is not applicable, it is used only when the house is held under a personal trust. ---
**Author:** ![kozakworld](https://sea2.discourse-cdn.com/flex016/user_avatar/www.protaxcommunity.com/kozakworld/32/1594_2.png) [@kozakworld](https://www.protaxcommunity.com/u/kozakworld)\ **Post date:** [April 7, 2023, 4:12pm UTC](https://www.protaxcommunity.com/t/principal-residence-exemption-joint-ownership-mother-son/6769/12 "2023-04-07T16:12:28Z")
Thanks for the detailed replies, @lokki. Very much appreciated. You answered all my questions, confirming my own thoughts that reporting it again on the T3 Trust for joint tenancy was not required. The details you provided are great for other people who run into similar situations. Thank you. ---
**Author:** ![joe.justjoe1](https://sea2.discourse-cdn.com/flex016/user_avatar/www.protaxcommunity.com/joe.justjoe1/32/220_2.png) [@joe.justjoe1](https://www.protaxcommunity.com/u/joe.justjoe1)\ **Post date:** [April 8, 2023, 7:39pm UTC](https://www.protaxcommunity.com/t/principal-residence-exemption-joint-ownership-mother-son/6769/13 "2023-04-08T19:39:48Z")
_“showing the mother’s 50% share in the joint tenancy property”_ You have not posted enough private information on this file to establish whether the mother’s beneficial share was 50% (recall the landmark Pecore v Pecore). However, if the rest of your file documentation establishes this, then it is possible that that is correct. “I’m about to file a T3 Trust for the estate.” The client is the Executor, so get them to provide you with everything that you need. - The executor should have written up the books for the estate. Note that the “legal” position often differs in some respects from the “tax” position. ---
**Author:** ![lokki](https://avatars.discourse-cdn.com/v4/letter/l/4da419/32.png) [@lokki](https://www.protaxcommunity.com/u/lokki)\ **Post date:** [April 9, 2023, 3:29am UTC](https://www.protaxcommunity.com/t/principal-residence-exemption-joint-ownership-mother-son/6769/14 "2023-04-09T03:29:44Z")
Another interesting thing I would like to share with you is the spousal rollover. The deceased husband owned 100% of a rental property with an ACB of $500,000 and a FMV at the time of death of $800,000. Under the spousal rollover, the surviving wife will assume the ACB and defer payment of the capital gain until she sells the property later. In the husband’s final tax return, no deemed disposition will be reported on Capital Gain Schedule 3. The rental property becomes part of the estate and is subject to probate. A trust tax return is also required, and when the legal process is completed to transfer the title from the deceased husband to the surviving wife, the trustee must report the disposition on T3 Schedule 1 under the “Real Estate and Depreciable Property” section, with Proceeds = ACB = $500,000, resulting in no capital gain or loss. Since this is a non-cash distribution, a statement of distribution of assets other than cash must be attached to the trust tax return. If anyone does it differently, kindly share your comments here. Thank you! ---
**Author:** ![Versa](https://avatars.discourse-cdn.com/v4/letter/v/53a042/32.png) [@Versa](https://www.protaxcommunity.com/u/Versa)\ **Post date:** [April 11, 2023, 8:08pm UTC](https://www.protaxcommunity.com/t/principal-residence-exemption-joint-ownership-mother-son/6769/15 "2023-04-11T20:08:00Z")
@lokki I feel like your last post should be a separate thread. Anyway, I had this situation recently and I did not file a T3 return. I just added the husband’s share of the rental property to the wife’s cost base on her T1 in the tax year after his death. I made notes of all the amounts. I suppose I could have filed a T3 as a graduated rate estate which would have resulted in less tax for the wife. But then ultimately a lot more paperwork and administrative fees so perhaps not worth it. ---
**Author:** ![snoplowguy](https://sea2.discourse-cdn.com/flex016/user_avatar/www.protaxcommunity.com/snoplowguy/32/2535_2.png) [@snoplowguy](https://www.protaxcommunity.com/u/snoplowguy)\ **Post date:** [April 11, 2023, 8:39pm UTC](https://www.protaxcommunity.com/t/principal-residence-exemption-joint-ownership-mother-son/6769/16 "2023-04-11T20:39:24Z")
Who is reporting the post mortem rents? The surviving spouse or the estate? ---
**Author:** ![lokki](https://avatars.discourse-cdn.com/v4/letter/l/4da419/32.png) [@lokki](https://www.protaxcommunity.com/u/lokki)\ **Post date:** [April 11, 2023, 9:03pm UTC](https://www.protaxcommunity.com/t/principal-residence-exemption-joint-ownership-mother-son/6769/17 "2023-04-11T21:03:44Z")
It is still O.K. not filing T3 Trust Return for the Estate as long as no income is generated that is subject to tax in the Trust before Dec 31, 2023. After Dec 31, 2023, the trustee has no choice but to file the T3 trust return even though there is no income in the Trust. I believe that simple spousal rollover should be reported on a T3 trust return. Be prepared to file many T3 trust returns, including Estate Trust and Bare Trust returns, in the coming years. I have gone through the painful process of learning how to prepare a proper trust return through CRA inquiries, reading books, and attending webinars. I had been posting questions on the forum and receiving many helpful advices, though some respondents treated me like an idiot. Anyway, I am willing to share my experience with my fellow accountant. ---
**Author:** ![lokki](https://avatars.discourse-cdn.com/v4/letter/l/4da419/32.png) [@lokki](https://www.protaxcommunity.com/u/lokki)\ **Post date:** [April 11, 2023, 9:06pm UTC](https://www.protaxcommunity.com/t/principal-residence-exemption-joint-ownership-mother-son/6769/18 "2023-04-11T21:06:54Z")
Before the legal title of the husband’s ownership tranferred to the wife, the Esate (T3 Trust return) should report the rental income and expenses. ---
**Author:** ![Versa](https://avatars.discourse-cdn.com/v4/letter/v/53a042/32.png) [@Versa](https://www.protaxcommunity.com/u/Versa)\ **Post date:** [April 11, 2023, 9:31pm UTC](https://www.protaxcommunity.com/t/principal-residence-exemption-joint-ownership-mother-son/6769/19 "2023-04-11T21:31:29Z")
I disagree. The spousal rollover is automatic. No election required and thus NO deemed disposition on death. So no need to report the disposition of the rental property on a T3. Furthermore if the ownership is in joint tenancy then the wife has full legal rights to the property with right of survivorship. She becomes full owner when husband dies and reports the rental income on her return. That’s the way I see it. No estate in this case. ---
**Author:** ![snoplowguy](https://sea2.discourse-cdn.com/flex016/user_avatar/www.protaxcommunity.com/snoplowguy/32/2535_2.png) [@snoplowguy](https://www.protaxcommunity.com/u/snoplowguy)\ **Post date:** [April 11, 2023, 9:38pm UTC](https://www.protaxcommunity.com/t/principal-residence-exemption-joint-ownership-mother-son/6769/20 "2023-04-11T21:38:38Z")
I think I am with @Versa here too regarding the rollover. The subsection 70(6) rollover can be straight from spouse to spouse (or to a spousal trust). @lokki did say the property was registered in the husband’s name only (not joint ownership). [Next page](https://www.protaxcommunity.com/t/principal-residence-exemption-joint-ownership-mother-son/6769.md?page=2)