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Proceeds of disposition on sale of property

Taxpayer disposed of his principal residence

  • Taxpayer and his roommate were 50/50 owners
  • Taxpayer sold his ownership share to his roommate
  • Purchaser is assuming the seller’s mortgage obligation

Vendor = Seller / taxpayer
Purchaser = roommate

The BUYOUT AGREEMENT states the following:

Vendor wishes to sell his interest in the property to the purchaser
The purchaser shall assume the Vendor’s mortgage obligation
Upon the closing, sole title to the property shall be transferred to the purchaser

Purchase Price
The purchase price payable by the purchaser to the vendor for the property shall be $55,000.

As of the date of this agreement, the purchase price has been paid in full by way of payment by the purchaser to the vendor and by way of set-off of the debt owed by the vendor to the purchaser.

upon the execution of this agreement, the purchaser shall assume the vendor’s obligations related to the mortgage.

My Proceeds of disposition calculation is:

$55,000 + 50% of the outstanding mortgage on the property on the date of sale.

Does anyone have different thoughts? Or saw a similar transaction in the past?

"Purchase Price
The purchase price payable by the purchaser to the vendor for the property shall be $55,000.
As of the date of this agreement, the purchase price has been paid in full by way of payment by the purchaser to the vendor and by way of set-off of the debt owed by the vendor to the purchaser."
Which genius lawyer would have drafted a real estate contract like that?

Tell the taxpayer to go back to the (qualified) lawyer and come back when he actually has an actual legal contract and the proper real estate documents.

What he presents to you needs to be better than he apparently has so far… (and which does not appear to constitute the necessary elements of a valid contract, by your description)

Even if it is a PR for income tax purposes, the taxpayer should have his real property transactions papered properly for other reasons.

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How much would you charge for preparing a T1135 when included with a T1 for the following?

a) one investment in one country

b) several investments in a few different countries (by # of investments or by # of countries?), held directly

c) several investments in a few different countries, held at a brokerage

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This is not a thread about T1135s - it is a thread about Property disposition…
Makes it a lot easier if it is one topic at a time in a thread…

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Agreed. Have reposted but not sure how to withdraw my response. Apologies.

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@tsolowczuk How ironic, I would not mind knowing the answer to your question.

I’ve reposted.

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Proceeds = money received = $55,000.
If it was his principal residence, you don’t need to care about the cost because the entire proceeds are covered by the principal residence exemption. Report on T2091.

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“Proceeds = money received = $55,000.”

… That would be probably ASSUMING the “mortgage obligation on date of Sale” is precisely $55.000.00 on the nose…
And a $55,000 price for 50% of a residence? - well, perhaps somewhere - but around here that would get you about 50% of 50% of 50% of an outside parking space…
And if the contract is not ensured to be correct, it could be a void contract, and the “seller” will not have to move out or give up possession, or the transfer registration or “sale” could be annulled/reversed…
Either way, it is up to the Taxpayer to provide the tax preparer with proper evidence and clarity for his files, so that the tax preparer is not put in the position of having to completely invent every figure that may or may not need to be reported on tax returns…

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Yeah, well, you see, Joe, on a forum like this we do not “tell all” about the transactions we are discussing. We may use round numbers so we can properly present the question and we don’t provide all the documentation that we may have. In this case there is no evidence that the taxpayer didn’t have all the necessary documents.

And, yes, there are places in Canada, not far from the nations’s capital where $55,000 for 50% of a house would not be unheard of. I own a red brick farm house where we raised our family of 6 that I have been trying to sell for 5 years and can’t. It has new windows, doors, wrap around veranda, roof, floors, on almost a half acre, nicely treed lot. Things are different out here!

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Buyer paid seller $55,000 & took over seller’s 1/2 of the mortgage obligation (mortgage is a couple hundred thousand - have to go look at exact #).

Proceeds of disposition calculation I have is:

$55,000.00 + 1/2 mortgage at date of sale

Here’s what I think that you need to know from your client:

a) How was the $55,000 paid to the seller? Is there a copy of the certified cheque or some other trail?b) Did the mortgage company agree to remove the seller from the mortgage?
c) Has the seller been removed from the legal title?
d) Do you have the statement of adjustments from the lawyer? (will show proceeds, property tax adjustments, legal fees, etc.)

Once you have the above information, you can proceed with calculating the POD (if you don’t have item d). I should mention that any transactions that deal with land have to be in writing and cannot be verbal.

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Ooops! Sorry! I didn’t read closely enough. It was after 10 PM, and a long day…I shouldn’t have tried to respond.
So, I think you have the CONCEPT correct as per your original post. The tax effects may be more complex, as you can see by others’ posts here…

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Thank you all for taking time out of your day to comment! Have a great weekend.