Clever planning can make a cottage transfer tax-smart
How to transfer a cottage to children under newer inclusion rates: gift vs. sale, use of reserves, and documentation to avoid surprises.
Summary of Tim Cestnick — The Globe and Mail (Tax Matters). The Globe and Mail. Read the original.
Summaries are for educational purposes. All rights to original articles remain with the publisher.
What it covers
This article compares gifting a cottage to selling it to your children. A gift typically triggers a deemed disposition at fair market value immediately, while a properly structured sale can use the capital-gains reserve to spread tax over several years.
Cestnick explains how promissory notes, staged payments, and accurate fair market value support can make the transfer more tax-efficient, and he notes the CRA scrutiny that can apply to non-arm’s-length transactions.
Why it matters
With higher inclusion rates, casual transfers can accelerate tax and reduce family flexibility. Poor documentation around value or payment terms can be expensive to fix later.
Cottagr takeaway
Treat cottage transfers as deliberate transactions. Obtain a reasonable valuation, document terms, and align the legal structure with how your family plans to use and fund the property.
Summary of Tim Cestnick — The Globe and Mail (Tax Matters) — The Globe and Mail