Gifting my U.S. home to my son living in the U.S.
Posted date : May 14, 2019.
My wife and I own a home in Arizona and are thinking of transferring ownership to our son, who lives in Arizona. We bought the house in 2006. We live in Canada. Would we have any capital gain to report, as this is not a sale but a gift to our son? Then could he not assume the house for our original purchase price?
Ed.: This is a little more complicated. Mr. Weylie states that your U.S. property can be passed on to your son without paying U.S. capital gains tax. However, the concern should be about gift tax. Unlike Canada, where one can gift unlimited amounts, the U.S. has limits on the amount which one can gift on an annual basis. The excess is subject to gift tax.
However, my very sophisticated Canadian tax accountant states that a gift of any asset is considered to be a disposition for Canadian income tax purposes. (You can gift any asset to your spouse without incurring Canadian income tax.) A gift to your children or anyone else would crystalize any accrued capital gains and the tax rate is about 27%.
If you gift U.S. real property, you would also incur U.S. gift tax on the value (not the gain). I believe that the rate is about 40%. There are ways to do it to reduce, and perhaps avoid, the U.S. tax – consult a U.S. accounting professional.
A final note on our wills: Mr. Weylie has written an article addressing this and other issues later in the magazine. It is possible and sometimes advantageous to have several wills relating to specific items. I personally have three – one for normal stuff, one for properties and one for my collections.
I recommend that you leave charities a specific amount of money – not a percentage or a residual amount. Leaving charities some of your stocks which have capital gains, rather than cash, can be very advantageous. In a perfect world, you will discuss your will and its contents with a U.S. tax lawyer and a U.S. accounting professional, as well as their Canadian counterparts. Do this now, during the planning stage, for best results.