Transfer of principal home to beneficiary

The deceased mom has her principal home left to his only son who has been living there with the deceased since acquisition. The son is thinking either to sell the home under the Estate and pay capital gain tax under the trust, or simply transfer the legal title of home to him and continuously live there. In both cases, I believe that we have to report the disposition on the Schedule 1 on the T3 tax return.
The questions are : (1) should we report the disposition under “Real Estate, Depreciable Property, and other” or under “Personal-use property” ? (2) If the son transfers the legal title and occupy the house as his principal home, what will be the deemed proceeds to be reported on the Schedule 1? FMV or the cost of the property to the trust (which should be equal to the FMV on death) ?
Your assistance will be greatly appreicated


If the son wants to keep the house, it simply rolls over to him at the estate’s ACB which would equal the fair market value at the mother’s death - acquisition by inheritance.

If the son decides to sell the house under the estate, the estate may be able to claim the principal residence exemption. I suggest you follow these links:


Since the son does not seem to understand who actually owns the property, he should first discuss this with the Executor, who in turn my need to discuss it further with the Estate’s Lawyer and the Estate’s Accountant.

As for who your client might be, it is unclear from your post who the client is. Ensure that you have proper Engagement letters from both/all clients that you may be acting for.

There is never anything simple about Estate/trust accounting and reporting, and there can be liability, so always wise to take care.

1 Like

Thanks Keith1, I notice that after 2016 the claiming principal residence exemption on the trust return is limited to alter-ego trust, spousal trust, disability trust or trust setup for minor children. Therefore, the exemption may not be available to most people.

Anyway, where should we report such disposition of principal home of the deceased on the T3 Schedule 1? under “Real Estate, Depreciable property and others” or “Personal-Use property” ?

I would report it as personal-use property since the son, a beneficiary, has been living in the property. CRA recently issued guidance on this issue and it is possible, in some situations, that the sale may not be a personal-use property and therefore a capital loss may be allowable where the sale by the trust results in a loss.

1 Like


Pretending the law does not exist at all is not going to help anyone at all in this matter.

The Estate cannot “dispose” of anything that it does not have title to in the first place…
… And the son will shortly find out that he cannot do anything with registered real estate that he does not legally own.

1 Like

The mom has a Will which stated that her only son is the executor and beneficiary of her principal home owned 100% under the mom’s name. The client is the son who is asking for accounting and tax services to prepare the trust return. A engagement letter is signed by the son, in the capacity as trustee. Thanks

Same comments apply.

Accounting and Tax reporting have to follow the actual legal documents, not the other way around.
In particular, copies of Land Titles printouts should be in the file. Copy of the Transfer tax exemptions for after-death transfers should assist in determining legal ownership presently.

Also, the client does not appear to be the Son per se, at least not as regarding a tax reporting entity.

The official Estate Accounting hopefully reconciles with the T1-final reported balances and dates, and shows who owned what and when.