Of Cottages And Capital Gains

The recent federal budget announcement of an increase of the capital gains inclusion rate to 66.67% from 50% on gains above $250,000 landed with a thud for anyone with a cottage. Some owners are selling before the proposed rule takes effect on June 25, 2024. But if you want the next generation to inherit the sunsets and call of the loon, it's a wake-up call to assess the tax implications for the people you love and look at options that will allow you to leave a legacy.

Under the deemed disposition rule, the CRA regards your vacation property as "sold at fair market value" when you die—whether your heirs sell it or not. Any net gain in value is reported on the final estate tax return. That's a big deal, especially if you've owned the property for a long time. That $30,000 cabin you bought in Port Renfrew, BC in 1986—a little haven from which to blast Trooper's "Here for a good time, not a long time"—might be worth half a million dollars today. The resulting tax bill