Capital Gains Tax on Inherited Property in British Columbia

If you have inherited a home or investments and plan to sell, you are probably wondering what tax you will owe. The answer depends on the property, how it was held and what the estate has already filed.

This article covers the tax points that affect a beneficiary and the executor in the background, and flags where you need an accountant to run the numbers for your situation.

This article covers the law of British Columbia.

Receiving an inheritance is usually not income

Most gifts and inheritances are amounts that individuals do not have to report as income on their tax return. That is separate from any tax the estate itself may owe.

Probate fees are also not a tax on you. The estate pays them.

Where capital gains questions come in

Questions about capital gains on a death usually involve two stages: what happens on the deceased's final return, and what happens when you later sell. How the gain is calculated, what value you are treated as having acquired the property at, and whether the principal residence exemption applies all depend on the details.

Because those answers turn on specific facts, such as when the property was bought, how it was used and what it was worth, ask an accountant to work through them before you list a property or sell investments.

• Ask the executor for the property's value around the date of death, if one was obtained.
• Ask whether the house was the deceased's principal residence for the whole time they owned it.
• Keep records of repairs, selling costs and any rental use after the death.

Filing dates for the final return

The executor files the deceased's final return, and the due date depends on when the death occurred.

The clearance certificate and why it matters to you

A legal representative who distributes assets without first getting a CRA clearance certificate is personally liable for unpaid amounts, up to the value of the assets distributed. The certificate is requested on Form TX19, Asking for a Clearance Certificate.

It should be requested only after all required returns are filed, notices of assessment are received, and all amounts owing are paid or secured. The request should not be submitted at the same time as filing returns. If new property is found after a certificate is issued, another certificate is needed before distributing it.

For you, this explains why an executor may hold back a final distribution while tax matters finish. It is usually a sign of caution, not delay for its own sake.

What to do next

• Ask the executor whether the final return has been filed and whether a clearance certificate has been requested.
• Gather the property's purchase details, value information and any records the executor holds.
• Book time with an accountant before selling, so you know your likely tax position.
• Ask a lawyer if the estate's timing or distribution plan is unclear.

Frequently asked questions