Published April 24, 2013 at 7:08 | Updated on 08 May 2013 8:49 in La Presse
Really, Revenu Québec exaggerating. I fully agree with the fight against tax evasion. But when the MRQ asks a couple
blameless pay $ 51,000 tax allegedly owed by another taxpayer, it crosses the line.
The story is preposterous … In 2010, Gisele and Bernard have paid $ 425,000 for a condo in the suburbs of Montreal.
The deed of sale, the notary said that the seller was no longer resident in Canada. Married to an American, he now lives
The notary should retain a portion of the proceeds from the sale until the seller his tax income. She would release the
money only after receiving a certificate from the tax authorities showing that the seller has paid tax on the capital gain
resulting from the sale of the condo.
But she did not. Serious omission.
In March, Gisele and Bernard received a letter from Revenue Quebec wants to stick their a tax bill of $ 51,000. Plus a
penalty of 15%. Plus interest accrued since 2010 … even if the couple has not been informed of this debt before 2013.
For a month, the couple does not sleep at night. It expects to receive, from one day to another, an assessment of about
Far from helping, tax officials showed “a certain aggressiveness and lack of empathy quite marked,” says Gisele. It was
explained that the seller had not produced documents to Revenue Quebec and he had not paid tax on the capital gain.
In this case, it is the buyers who pick up the bill.
Yes, you read that right. When a property is sold by a non-resident Canadian, tax laws are clear: it is the buyer’s
sponsibility to ensure that the seller has actually paid the tax on its capital gains.
So, think twice before buying the house of a non-resident! If the seller leaves Canada without paying its due, the MRQ will
turn against you. And he will not lace. The MRQ may claim 12% provincial and 25% federal.
Completely arbitrary! The tax applied to the buyer has no connection with the real tax invoice from the vendor.
In the case of Gisele and Bernard, the previous owner had paid $ 353 310 for buying the condo in January 2008, found
Paul Ryan, tax lawyer and author of When the IRS attack, which searched the records at my request.
As the former owner sold the condo $ 425, 000, it means that his capital gain amounted to $ 71 690. Of this amount, $
845 only 35 are taxable as capital gains are taxable only half.
So, even if the former owner was taxed at the highest rate (24%), provincial tax on the sale of the condo could not
exceed $ 8,600. However, Revenu Québec holds a $ 51,000 bill to buyers torque. This is absurd, but the law is like that.
This is the law of least effort.
Knowing that it is difficult and costly to pursue taxpayers who live abroad, the IRS puts the burden on buyers. Gisele
and Bernard could sue themselves the seller, but the attorney’s fees may be higher than the amount they could recover.
In any case, Revenue Quebec has no intention to exercise clemency. The IRS does not even seem willing to let
bygones be bygones on penalties and interest, although it may do so in certain circumstances.
“The purchase contract clearly states that the seller said to be non-resident of […]. In this context, we understand easily
that the [buyer] was not informed, especially since no amount was withheld from the sale price as provided in Section
1101, “I replied spokesman of Revenu Québec, Stéphane Dion.
In other words, the IRS blames the notary. Indeed, it seems to have done its job properly.
When the seller is non-resident, “the duty of the lawyer is to advise purchasers to deduct part of the money in case
there would be taxes to pay. If that duty has not been exercised, it is certain that there is a responsibility, “said the
president of the Chamber of Notaries, Jean Lambert.
Gisele and Bernard could therefore be reimbursed their tax bill by professional liability insurance of the Chamber of
Notaries of Quebec (FARPCNQ) Fund, which covers clients who are victims of a mistake on the part of a notary.
So much the better if the Fund accepts the request of the couple. But that does not stop me from thinking that the tax
goes too far.
“In the context of the fight against tax evasion, the MRQ has made nets to catch large sharks. But the cracks bring small