Estate will owe taxes on real estate inheritance

The tax consequences of a real estate inheritance and permitted medical expenses were among the topics raised in the latest batch of reader questions. Here’s what they wanted to know.

Q: “When my father died, I inherited his triplex, where I had been living prior to this death. Do I owe taxes on it now or when I sell?”

A: Your father’s estate owes the taxes. For tax purposes, it’s treated as if he sold the building for current market value when he died. If he was living in one of the units at the time of his passing, that unit would be covered by the principal-residence, and capital-gains taxes would apply to the other two-thirds (including the unit you’re living in). If he didn’t reside in the triplex, appreciation of the full building would be taxable.

Q: “I would like to know if we are allowed to deduct parking expenses for medical reasons. I spent about $650 on parking in 2013 for visits to various hospitals, clinics and specialists after a breast-cancer diagnosis. Is this a deduction on my income tax?”

A: Probably not. Canada Revenue Agency generally allows for parking, meal, transportation and accommodation costs to be included as medical expenses only if you had to travel at least 80 kilometres (one way) for medical services not available closer to your home.

Q: “Could you tell me if the Quebec health contribution (Line 448 of the provincial tax return), the contribution to the health services fund (Schedule F) and premiums to the Quebec prescription drug plan (Schedule K) qualify as medical deductions on my tax returns?”

A: No for the health contribution and health services fund, yes for the prescription drug plan. Quebec gives you the option — subject to certain conditions — of claiming your 2013 assessment for the drug plan (Line 447 of the provincial return) as an expense on your 2013 or 2014 tax return (but not both). Ottawa won’t let you claim this year’s assessment for the plan until the 2014 tax year.

Q: “I am presently a Quebec resident and will be applying for the Quebec Pension Plan when I turn 60. If I move to Ontario in a year or two, will I be switched to the Canada Pension Plan? What if I resume working in Ontario? Will there be an increase in QPP benefits, or will I qualify for CPP?”

A: If you’ve only paid into QPP during your working life, the Régie des rentes du Québec will be your pension provider regardless of where you live. If you’ve worked elsewhere and paid into CPP as well, it will be your province of residence at the time you apply that determines if you receive QPP or CPP. You’ll have to pay CPP dues even if you go back to work in Ontario and are already collecting a pension; the option to opt out of CPP dues is available only at and beyond age 65. Any contributions you make to CPP would entitle you to additional compensation from that plan.