Tax Question asked by Andrew Malik
My mother passed away in India last month. I am receiving my share of the family house. The home is located in India. I am a resident of Canada. Do I need to pay taxes in Canada when this property is transferred to me?
Disclaimer: This is not tax advice. The answer below is for general purposes. Please exercise caution while making any decision based on this post or any other post on this website. This question may have been rephrased to correct some of the technical terms. The rephrased questions are often more helpful to a wider range of readers.
Thank you very much for asking us this question. In fact, we have a lot of inquiries where people ask the same question.
There are no taxes on the receiver of gifts of inheritance in Canada. If you received property because of inheritance or a gift, you do not have to pay income taxes in Canada. So, you do not need to report it on your Canadian Individual income tax return.
The donor of the gift, on the other hand, is subject to income taxes. If your mother was a resident of Canada, her final tax return accounts for these capital gains, if any. If she was a non-resident of Canada, her tax affairs are going to be dealt with in her country of residence.
Since you mentioned that the property is located outside Canada, you may have other reporting requirements. For example, if the cost of the property is more than $100,000 at any time during the tax year, you must file T1135. If you are not living in that property, you might have rental income that will be taxed in Canada.
The inherited or gifted properties have an adjusted cost basis (ACB) equal to the Fair Market Value as of the date the property was gifted to the receiver. It’s important that you keep track of this ACB as you will need it at the time of disposal of this property (or even deemed disposition) in order to calculate Capital Gains at that time.
There is a detailed post on the taxation of foreign inherited property in Canada you should check that out as well.