Value of Consideration
- Can the transferee split a conveyance for the same property or register multiple conveyances in order to avoid the progressive rate of land transfer tax?
- How is land transfer tax calculated on the purchase of a vacant lot which is subject to a construction contract?
- Sometimes, for income tax purposes, a conveyance is made where consideration is "deemed" to be paid. In these instances, would tax be payable?
- How do you calculate tax if the value of the consideration is in American dollars? What is the date used for conversion?
- If the transferee is acquiring a 33% interest in land subject to a mortgage, does the transferee pay tax on 33% of the mortgage?
- If the transferee has agreed to fully pay the outstanding balance on a mortgage against the land being conveyed where the transferor was listed as the mortgagor, is the payment of the mortgage included in the value of the consideration?
Can the transferee split a conveyance for the same property or register multiple conveyances in order to avoid the progressive rate of land transfer tax?
If it is evident that one of the reasons for registering multiple conveyances is to reduce the tax liability, tax will be collected as if only one conveyance was registered.
In most cases, registering separate conveyances for properties with separate legal descriptions and Property Identification Numbers is not considered evidence of purposely reducing tax liability.
How is land transfer tax calculated on the purchase of a vacant lot which is subject to a construction contract?
Where a construction contract is entered into as part of the arrangement relating to the purchase of a vacant lot or lots, the land transfer tax is calculated on the:
- total cost of the lot, plus
- cost of construction.
Sometimes, for income tax purposes, a conveyance is made where consideration is "deemed" to be paid. In these instances, would tax be payable?
Any consideration declared on the affidavit will trigger tax unless an exemption applies. However, the affidavit should only show the actual consideration given or to be given for the conveyance.
How do you calculate tax if the value of the consideration is in American dollars? What is the date used for conversion?
All monies must be expressed in Canadian dollars. Therefore, the land transfer tax affidavit must set out the amount of the consideration in Canadian dollars. The date of currency conversion should be the:
- date that the agreement of purchase and sale is accepted and becomes a binding contract, or
- date of registration if no agreement has been reduced to writing.
If the transferee is acquiring a 33% interest in land subject to a mortgage, does the transferee pay tax on 33% of the mortgage?
Yes. Tax must be paid on:
- 33% of the balance of principal still owing under the mortgage, and
- any other consideration given or to be given as part of the arrangement relating to the conveyance.
If the transferee has agreed to fully pay the outstanding balance on a mortgage against the land being conveyed where the transferor was listed as the mortgagor, is the payment of the mortgage included in the value of the consideration?
Yes. Tax must also be paid on:
- the payment of the outstanding balance owing under the mortgage (which would form part of the value of the consideration for the conveyance), and
- any other consideration given or to be given as part of the arrangement relating to the conveyance.
