does with the place.

Also, if the value rises between
transfer and sale, that profit belongs
to her.

There could be problems with
Revenue Canada about the tax treat-
ment in your daughter's hands of
the rental income and expenses and
any profit. However, if she sells the
plice within a month or two, the
risk isn’t that high.

Assuming you do go ahead with
this plan, you might want to set an

“interest rate on the mortgitge so the

net rental income result remains
unchanged.
Let's say you now collect $800 a

month rent and have $250 worth of

DOLLARS. AND SENSE

AS. THE new federal govern- -
ment’s first budget draws
closer, with the possibility the
capital gains exemption will
be cut or curtailed, many
people are lookiag at last-_
minute ways to use the
exemption,

“y’ ve hada piece of revenue
property up for sale for the last sev-
eral months but so far, no. takers, n
said reader Jill. -

‘{ bought it. for $50, 000-17 years:

ago and today: it’s worth $150,000.
If I can't sell it before the budget, ©
and if they: take away the capital ...
gains exemption — I’ve used hard-’ ;
ly any of it so far — ! could take a
really big tax hit. 3.000... :
aV'ma single parent sot can't

transfer the house to my spouse, .
But coisld give the place to my 19-
year-old daughter to trigger the cap- :
tal. gain? ‘The. place would stay up...
for ‘sale éven though i it would be in”

ername.: °°"

MIs this a good | idea, and if so do

OU. ‘have any ideas on how to set

Yes, this can be a sound y
approach.: By realizing your capital.
gain no’ ‘and claiming the partial -
exemption allowed (following the
February 1992. rule change about :
he ¢ exemption and revenue proper-

), you will Save up to‘about *
30,000 tax —- compared with sell-

g later and being unable to claim ‘
he exeniption. Pe

“The exact tax saving “will depend.
on your tax bracket and other fac-

5 -— for example, ' whether you
have aCNIL: (cumulative net’
investment loss) balance which .
would reduce your ability to claim |

‘Our exemption, and whether the
ain will trigger the AMT (alterna-- ‘
ive: minimum tax).

Your main risK in/all this: You

Ii. incur some extra costs by trans-.
ferring the house to your daughter
before it is sold, money which will

ave been wasted if the capital

as exemption and other rules
remain unchanged. '* .

Probably your biggest expense, is

he B.C. property ‘transfer tax unless:
a trust-arrangement can be set up.
Your: daughter will have to pay the
1,500 tax, plus other conveyancing ;
“fees — — cos ; you will presumably.

s

There could be other costs you .
wouldn't incur if you sold the prop-

rty directly.

“Forexample, you will probably -
want to take back a $150,000 mort-
gage from your daughter to protect
your position; especially, for exam-
ple, if she decided to keep the ~
house, ‘got married and they subse-
quently split up. Without the mort-
page, your ex-son-in-law could eas-

ly end up with half the value of
your home. ;

“That brings up another point: If
you give your daughter the house.
even with a full mortgage, you have
‘no further control over what she

expenses. You could set the nite so
your daughter pays you $550 inter-
est a monih.

That way, your daughter ends up
with $800 rent and $800 rent,
expenses, for no change in her
income, You end up with the same

“net income of $550 a month you

had before —- only this time you
receive interest instead of rent.
You will sti) have to pay tax on.

66 You will incur
some ext ‘a costs by
a ransferri ing the house
10 ? your daughter. 99

that part of your-capital gain which

doesn't qualify for the exemption
— triggered when you transfer the
. house to your daughter. fs
' Normally, you won't have to
pay that tax untif: April next year
and so should have the money in

- “hand as long as the house sells by

’ then.: When the house does sell.’ -
“your daughter will pay you back’ the,
“balance owing on’ the mortgage.

Even if you don’t have a conve-

~“nient family member around, other
_ Ways exist fo trigger a capital gain
--on an asset that hag appreciated in

value to take advantage of the capi-
tal gains exemption’ while it still
exists.

For example, you can sell one

“= mutual fund and buy another; with-

in the same fund farnily. you will
probably pay no fees. Or you could

transfer a mutual fund (or-stock) to .
. your registered retirement savings

plan as a contribution or sell the
investment to your plan for cash.
That would also trigger the capitat

: gain. -

INTERESTED IN SAFE}

ALTERNATIVES?

“ Please Call:
The North Shore's only
Full Service investment Firm

981-6600

RBC .
DOMINION
SECURIMES

MEMIIER OF ROYAL BANK GROUP .
201-250 15th St, West Vancouver |

Mike Grenby is a North Shore-
bused cotunnist and independent

financial advisor who works with

individuals; he will answer your

questions in this colunn as space

allows — write to hin clo The
North Shore
Ave.,

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* The 6 highest or any offer will not necessarily be accepted. ©

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