Buying a property from a relative

[Marta Castelhano]

Hi there,
I'm interested in buying a property owned by a relative. The value of the property is approximately $850,000 and approximately $250,000 would be inherited.
What is the best way to structure the deal to minimize capital gains for the current owner and minimize Land Transfer Tax for me?
Specifically, I'm interested in whether the agreement to purchase should be $850,000 or $600,000. I need to mortgage at least $450K. Any thoughts?

Also interested to hear from mortgage brokers on how the lenders would deal with this type of arrangement.

Thanks in advance.

 

[Bernadette]

Hi Marta,
It sounds to me like your agreement to purchase should be at $600,000 if $250K is being inherited/is a gift. This purchase price will help lower the LTT simply because it's a lower price point. The LTT will be calculated differently depending on which province the home is located in. The capital gains will still depend on the purchase price so maybe talk to your accountant and lawyer about options - maybe structuring some kind of private vendor take back mortgage?

Hope that helps!

 

[Thomas Beyer]

Assuming this is not a personal residence then buying below fair market value shifts future capital gains taxes to you.

Unclear from your post why 250,000 is inherited and how it relates to the 850,000 ? Did someone die ? If you pay only 600,000 how will the 250,000 be accounted for ? Are there other heirs ? Wouldn't the other heirs get maximum value for the property of the deceased ?

 

[RE123RE]

Hi,
How does paying zero tax sound?
Have you considered having your relative refinance her/his property, giving you the money, you paying her/his mortgage?
Thanks