Q: My parents have decided they need to downsize and have offered to transfer their nicely-sized home to me and my husband. We have been told that they can gift the property to us for one or two dollars, which effectively allows us to not pay land transfer tax. Can we legally do this?
A: The concept of gifting between close family members is a well conceived notion that is possible but needs to be clearly examined.
The government under the Ontario Land Transfer Tax Act wants to make sure that there is no money changing hands under this type of transfer.
For example, if you are paying off a mortgage your parents may have on the property when the home is gifted, then there is ‘consideration’ and land transfer tax must be paid on that outstanding amount because there has been value received.
In another instance, if you are providing any money to your parents for their home, then it is not a true gift and you must pay tax on this consideration. Only true non-monetary gifts qualify for the exemption of this tax.
You should be careful about this issue as you must be aware that the tax man always gets its man.