Fix a previous tax error
If you discover an error or want to report an omission, you possibly can accomplish that with the Canada Revenue Agency (CRA). It’s called the Voluntary Disclosure Program (VDP). According to CRA:
“The Voluntary Disclosures Program (VDP) provides taxpayers with the opportunity to notify the Canada Revenue Agency (CRA) of and correct errors or omissions in their tax obligations. If the CRA grants relief under the VDP, a taxpayer may receive some relief from penalties and interest and will not be referred for prosecution. Any taxes owed must still be paid in full by the taxpayer.”
Changes were introduced for the VDP on October 1, 2025. The application form, Form RC199, Application for the Voluntary Disclosures Program (VDP).has been simplified to make submission easier. The program has also develop into less restrictive. CRA has launched a program to send clarification letters about unreported income or ineligible expenses to make sure compliance, but is not going to dissuade a taxpayer from filing. Before the changes, a VDP needed to be done with no request.
If you’re under audit or have a history of great non-compliance, it’s possible you’ll be banned from a VDP application.
There are two kinds of relief provided by the CRA under the VDP:
- General relief Typically applies to unsolicited applications. For these applications, a discount of 75% of the applicable interest and a discount of 100% of the applicable penalties are granted.
- Partial relief Typically applies to invited applications. These applications receive a discount of 25% of applicable interest and a discount of as much as 100% of applicable penalties.
Exemption from the first residence requirement for a vacation home
The excellent news in your mother, Susan, is that there have been probably no taxes due on the transfer of her vacation home to you. Often a vacation house is subject to capital gains tax whether it is sold, transferred or dies when the second spouse dies – but not all the time.
A vacation home may qualify for the first residence exemption (PRE). The PRE could be used for any property you normally occupy, with no limit on the variety of days. It doesn’t matter where you primarily live or where your postal address is registered.
Since the one property your parents ever owned was this cottage, Susan, the property was likely not taxable whether it was sold to you for $1 or at fair market value by your mother.
It is price noting that because the 2016 tax yr there was an obligation to declare the sale of a foremost residence in your tax return to ensure that it to be eligible. Previously, you weren’t required to report a property that was considered your primary residence for every year you owned it.
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Selling or transferring property for lower than market value
It can be price noting that selling a vacation home that doesn’t qualify for the first residence tax exemption at a price below fair market value doesn’t constitute a possibility to avoid tax, nor does it constitute a gratuitous gift. A sale or transfer to an arm’s length party – comparable to B. a toddler – is taken into account a sale at fair market value, with the vendor or transferor paying taxes accordingly.
The child who acquires the property may face double taxation. If their acquisition cost is lower than the market value, once they sell the property in the long run they might unnecessarily pay taxes on the difference between the acquisition cost and the market value on the time of transfer.
I believe that is what you are frightened about, Susan. However, the excellent news is that the transfer to you possibly can be considered to have been made at fair market value, even if you happen to only paid $1. The CRA addressed this in a tax interpretation in 2019 (January 24, 2019 2018-0773301E5):
“In certain circumstances, the Canada Revenue Agency may be willing to accept that the transfer of property between non-arm’s length parties for the nominal amount of $1 could be considered a gift. For example, if the agreement governing the transfer only provides for consideration of $1 to ensure that the agreement is legally binding, the CRA may consider the transfer to be a gift.”
That could possibly be the case in your situation, Susan. They also say:
“Section 69(1)(c) of the Act applies where a taxpayer (the recipient) has acquired property by “gift, bequest or inheritance”. If paragraph 69(1)(c) applies, the recipient is deemed to be purchasing the property from FMV [fair market value].”
So you possibly can be within the clear. If doubtful, you possibly can contact the CRA to request a general technical interpretation or a more formal income tax regime specific to your situation.
The takeaway: Anyone fascinated about transferring or selling a property to a member of the family needs skilled advice.
Leave your query for Jason Heath
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