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Inheritance to buy investment property

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Anonymous Asked:

We were married in 1979 and have lived in our matrimonial home since our separation in 2014. Though "separated", we both reside in the matrimonial home but live separate lives. In 2004 I used an inheritance to purchase an investment property (condo in downtown Toronto) which has been rented. I am contemplating moving into the condo within 6 months. a few questions:

1) Our matrimonial home will likely be up for sale. Assuming I am living in the condo before the matrimonial home is sold, what are the income tax ramifications for me. Am I looking at capital gains tax on my share of the matrimonial house proceeds, given that I will have a new residence (the condo)? The matrimonial home was purchased in 1983 for $175,000, it's current value is now approximately $900,000.

2) I used an inheritance as part of the downpayment for the condo purchase in 2004. Mortgage and condo fees have been covered by tenant's rent. Is the condo considered a joint asset to which my estranged spouse has a claim?

Expert Comment:

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Andrew J. Kania, LL.B., LL.M.
6 years ago

Answer: It is imperative that the matrimonial home not lose its principal residence status. We can accomplish this in a separation agreement or Court Order by way of including the necessary language. If the proper language is used, then the principal residence status will be maintained regardless of where you live. Detailed tax advice cannot be provided in this forum

The condominium is an asset that must be listed on your Financial Statement as part of the equalization of net family property calculations. However, the inheritance may be an “exclusion,” allowing you to claim a credit for the inheritance amount, subject to whether the condominium has been, or subsequently becomes, a matrimonial home. I would need to ask you some questions before commenting further.

(The information provided above is general, not legal advice, as circumstances vary from case to case. Thus, if you wish legal advice that you can rely upon for your specific case, please contact Andrew Kania for a free consultation).

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