New CRA Rules for Declaring Sale of Family Residence

A colleague brought this to my attention today and I thought it was worth sharing since in the context of family law and separation, the sale of the family residence is often an issue. 


CRA announced on October 3, 2016 that they had made administrative changes to the reporting requirements when it comes to sale of a principal residence.  Previously, if you sold your principal residence you did not have to report the sale on your tax return if you did not have to pay tax from the gain of the sale.  This would be the case if you were eligible for the full income tax exemption meaning that the residence was your principal residence for every year that you owned it.  Conversely, if you sold an investment property, you are required to report the sale and pay tax on the gain.  The new CRA policy says that starting in 2016, and retroactive to January 1, 2016, you are required to report the sale of your principal residence in order to claim the full exemption, and you need to provide information about when you bought it, the sale price and so on. 


More information can be found on the CRA website HERE


Karen F. Redmond

CBABC Family Law Working Group's Submissions to the BC Ministry of Justice

As detailed in our September 19, 2016 post, the BC government sought input on its two Discussion Papers regarding the Family Law Act's guardianship provisions and the presumption of advancement and property division.

The CBABC Family Law Working Group has published their submissions to the BC Ministry of Justice. Their submission on guardianship provisions is available here, and their submission on the presumption of advancement and property division is available here.

The Ministry of Justice's website explains that staff is now reviewing the feedback and determining whether there is support for developing recommendations for amendments to the Family Law Act.


Jennifer Woodruff

October 2016 Update on Excluded Property in British Columbia

In 2016 our Court of Appeal handed down two decisions which have changed the way family lawyers advise their clients about excluded property.  The Family Law Act defines Excluded Property in section 85, as property that is excluded from Family Property and includes:

 (a) property acquired by a spouse before the relationship between the spouses began;

(b) inheritances to a spouse;

(b.1) gifts to a spouse from a third party;

(c) a settlement or an award of damages to a spouse as compensation for injury or loss, unless the settlement or award represents compensation for

(i) loss to both spouses, or

(ii) lost income of a spouse;

(d) money paid or payable under an insurance policy, other than a policy respecting property, except any portion that represents compensation for

(i) loss to both spouses, or

(ii) lost income of a spouse;

(e) property referred to in any of paragraphs (a) to (d) that is held in trust for the benefit of a spouse;

(f) a spouse's beneficial interest in property held in a discretionary trust

(i) to which the spouse did not contribute, and

(ii) that is settled by a person other than the spouse;

(g) property derived from property or the disposition of property referred to in any of paragraphs (a) to (f).

(2) A spouse claiming that property is excluded property is responsible for demonstrating that the property is excluded property.

 

 

On plain reading of the Family Law Act, it would appear that a person, who received an inheritance and could prove it, was entitled to claim it as Excluded Property.  Not so, the Court of Appeal tells us.  These cases tell us that the provisions of the Family Law Act cannot be considered in isolation, that FLA is not in itself a complete code, and that we must look at the intentions of the parties at the time the inheritance was received or the property was transferred. 

 

In Cabezas v. Maxim, 2016 BCCA 82, the parties met in 2005 and began living together in 2006.  In 2007 they purchased property together and Mr. Maxim paid a $56,000 down payment.  The balance of the purchase was funded through a mortgage of $256,000.  The parties struggled financially so Mr. Maxim’s parents paid a total of $187,349 to discharge the mortgage, without any written agreement or loan document.  After separation in 2013 and following the sale of the family residence, Mr. Maxim argued that the net sale proceeds of $196,070 were his excluded property.  Mr. Maxim’s mother testified at trial that she intended the money to be given only to her son as an advance on his inheritance, and not to the couple together.  In the absence of any contemporaneous evidence suggesting the payments were loans, as well as the manner in which she gave  money to her other  children, the trial judge concluded that the funds were given as a gift intended to benefit both parties (at para. 67).  The judge found that the mother’s intention to provide the funds as an advance on her son’s inheritance were found to have been made after the gifts had been made, therefore they were not excluded property. 

 

Mr. Maxim appealed the trial decision and on February 23, 2016 the B.C. Court of Appeal handed down this first decision which confirms that the Family Law Act is not a complete code, meaning that the common law principles can still be considered in each case.  Madam Justice Garson, at paragraph 38 clearly states that the common law provides interpretative context to the Family Law Act. 

 

 

On April 28, 2016 the Court of Appeal handed down the decision in V.J.F. v. S.K.W., 2016 BCCA 186.  At paragraph 72 Madam Justice Newberry, citing the Cabezas and Maxim case, says that case “provides additional support for the conclusion that common law precepts continue to apply at the earlier categorization stage.”  The Court found that the 2 million dollar inheritance received by the husband, and used to purchase a property solely in the name of the wife was properly characterized by the trial judge as family property, subject to equal division. 

This clarifies that the common law and equitable principles as they relate to property have not been eliminated by the Family Law Act. 

 

So, what do we know now? 

These cases tell us that the Excluded Property provisions of the Family Law Act are not a complete code and in advising our clients we need to look at the intention of the parties and or their parents or relatives at the time the gifts or inheritances were given or property was received or transferred.  It isn’t enough at separation for a person to say,

“hey I know I put all of my inheritance down on the mortgage on our joint property for twenty years of our marriage but I really meant to keep it all to myself if we separated…”

 

there needs to be evidence of intention at the time these decisions were made. 

In 2015, and certainly before these Court of Appeal decisions, lawyers may have been telling their clients that the Excluded Property Provisions of The Family Law Act would protect their gifts and inheritances in any circumstance, but those assurances can no longer be given. 

 

So, what can you do?

1. Draft a marriage agreement or a cohabitation agreement and clarify your intentions.
2. Make sure you have documentation at the time your property/gift/inheritance is received or transferred.
3. Sign a Declaration of Trust if you intend that your spouse will hold property in trust for you.
4. Be aware of the inference of joint right of survivorship that arises with joint bank accounts and property held in joint tenancy.
5. Talk to a family law lawyer about your options. 

written by

Karen F. Redmond

2016 Cases that have applied the V.J.F and Cabezas decisions:

Wong v. Rooney, 2016 BCSC 1166

Bell v. Stagg 2016 BCSC 1491

Jaszczewska v. Kostanski, 2016 BCCA 286

Sardinha v. Sardinha, 2016 BCSC 348


J.D.G. v. J.J. V. 2016 BCSC 348