Who orders this
- Owners converting a home to a rental, or a rental to a home
- Executors reporting a deemed disposition at death
- Families transferring property between relatives
- Accountants and tax lawyers who need a supportable value
When a fair market value appraisal is needed for tax
Canadian tax rules sometimes treat property as sold at fair market value even when no sale happens, and a sale to a relative may also be measured against fair market value. In each case someone has to establish the value, and an independent appraisal is the usual way to support it. Your accountant decides whether one is needed and at what date.
We do not give tax advice. Talk to your accountant about whether an appraisal is required, the effective date and what the report should cover. Then order with that purpose and date stated, so the appraiser prepares the right kind of report.
- Change in use, such as moving out and renting the home
- Deemed disposition at death
- Gifting or selling property to a family member
- Transferring property to a corporation or trust
- Splitting the gain on a home that was a principal residence for only part of the time
Current or retrospective value
Many tax situations look back. A change in use may have happened two years ago, or a death last spring. A retrospective appraisal values the property as of that past date, using sales from the period and evidence of the property’s condition then. Records such as old listings, photos, renovation invoices and leases help the appraiser reconstruct the picture and produce a value your accountant can rely on.
Frequently asked questions
Do I need an appraisal for capital gains tax across Canada?
Not always, but an appraisal is the usual way to support a fair market value when there is no arm’s length sale, such as a change in use, a death or a transfer to family. Your accountant can confirm whether one is needed and the date it should reflect.
Does the CRA require an appraisal?
The Canada Revenue Agency expects fair market value to be reported and may ask how you arrived at it. An independent appraisal is strong support. Whether to obtain one is a decision for you and your accountant; we do not provide tax advice.
Can an appraisal be dated in the past for tax purposes?
Yes. A retrospective appraisal estimates value at a past effective date, such as when you started renting the home or the date of death. Provide the exact date and any records showing the property’s condition at that time.
What is a change in use for a property?
It generally means converting a property from personal use to income-producing use, or the reverse, such as renting out your former home. The tax rules can treat this as a sale at fair market value. Ask your accountant how it applies to you.