Gifting Real Estate to a Family Member in BC: How It Works

Giving a property to a child or another relative can feel simple: you are not being paid, so what is there to calculate? In practice, a gift of real estate is still a transfer of title, and both the province and the Canada Revenue Agency look at it.

This article walks through how a gift generally works in British Columbia, the property transfer tax exemptions that may apply, and the capital gains rules that surprise many families.

This article covers the law of British Columbia.

How a gift of land works

A gift is made by transferring title to the recipient. Transfers are registered through the land title system, and the registered owners can make a direct transfer to one or more of their number, alone or jointly with another. If the recipient will be added rather than replace you, the wording matters: people who take title together are tenants in common unless the document shows a contrary intention, and unstated shares are presumed to be equal.

A transfer to spouses is not treated as an exception to that presumption just because they are married, since spouses are treated as 2 persons for the acquisition of land.

Before you transfer, check your mortgage. Lender consent to a change in title is a contract matter, and a lawyer can review the terms with you.

Property transfer tax exemptions that may apply

The most common exemption for a family gift is the principal residence exemption. The transferee must be a related individual and a Canadian citizen or permanent resident, and the property must have been a principal residence for a continuous period of at least six months immediately before the transfer.

Related individuals include a spouse, child, grandchild, great-grandchild, parent, grandparent or great-grandparent, the spouse of a child, grandchild or great-grandchild, and the child, parent, grandparent or great-grandparent of a person's spouse. Siblings are not on that list. A sibling therefore qualifies only for the farm exemption, not the general principal residence one.

Partial exemptions and special cases

• Large or non-residential land: land over 0.5 hectares (1.24 acres), or not classified residential, is not fully exempt; the exemption applies to the residential improvements and land of 0.5 hectares or less, with a partial-exemption formula for the rest.
• Adding someone to title: an exemption is claimed only on the part of the interest coming from related individuals, and tax is payable on any interest acquired from an unrelated owner.
• Joint tenancy: where title is held in joint tenancy and one owner transfers an interest, eligibility is assessed on the partial interest actually transferred.
• After a divorce: remaining related owners who acquire the former owner's share can each claim a full exemption on their increase in interest.

Tax rates, other exemptions and additional tax rules change by year, so confirm the current rules before you sign.

Capital gains and the Canada Revenue Agency

A gift of capital property is treated as a sale at fair market value on the date of the gift, with any gain or loss reported for that year. For non-arm's length sales below fair market value, the proceeds are deemed to be fair market value. This catches families who sell to a child for one dollar.

There is an exception for spouses: you generally do not have a capital gain or loss if you give capital property to your spouse or common-law partner, and the recipient takes your cost. You can elect on the return for the year of transfer that the rollover not apply, which makes proceeds fair market value.

No general rollover applies to a gift to a child. Only farm or fishing property transfers to a child, spouse or spousal trust may postpone gain. Gifting a home to a child is therefore a deemed sale at fair market value, with any gain on a principal residence addressed through the principal residence designation. If the property was ever your principal residence, report it on Schedule 3 and Form T2091(IND). A change of use to or from principal residence is generally a deemed disposition at fair market value. A rental property or cottage may be treated very differently from your home, so speak with an accountant.

What to do next

• Get a current appraisal or market opinion, since fair market value drives the tax.
• Confirm whether the property has been your principal residence and for how long.
• Check the land size and zoning against the 0.5 hectare limit.
• Read your mortgage for restrictions on transferring title.
• Ask an accountant to estimate the capital gain, and a lawyer to prepare and register the transfer.

If the gift is part of an estate plan, ask whether a will would achieve your goals with fewer consequences while you are alive.

Frequently asked questions