Why you need a Tax Appraisal?
There are numerous reasons for the CRA to want to know the true market value of a property. However, all reasons are geared around collecting tax revenue. The main reason revolves around capital gains/loss, which is triggered whenever a property has a change of use.
Owners of income producing properties crystallize the property’s value as of specific date to establish a base to be referenced at the time of a future sale or change of use.
Common examples of a real property’s change of use:
1. The property was at one time a ‘principal residence’, but then the use was converted to ‘income property’.
2. An ‘income property’ may have been converted to a ‘principal residence’ at some point.
3. The owner has lived in half of an ‘income property’ and the second unit was rented.
In each of these 3 scenarios the issue of Capital Gains Tax arises. When that happens an appraisal of Fair Market Value is required by the CRA for measuring the taxable portion of the gain.