Selling your plex to your children on the North Shore: the 7 tax rules to know before you sign

ImmoMulti — direct buyer of plexes and multiplexes on the North Shore — regularly hears the same question: "I want to pass my triplex on to my children, how do I go about it?" It is a generous plan, but Quebec and Canadian tax law imposes strict rules that few owners anticipate. Whether you want to sell your income property to your children at a reduced price, gift it, or transfer it through a vendor take-back, the tax authorities always treat the transaction at fair market value (FMV) — with all the tax consequences that entails for your plex on the North Shore.

The deemed-disposition rule at fair market value

If you transfer your plex to your children for less than its fair market value, the CRA will still deem that you received the full market price. You pay the capital gain on the total value, not on the price you actually received.

This is the fundamental rule for all transactions between non-arm's-length persons (parents, children, spouses, controlled corporations). It is codified in subsection 69(1) of Canada's Income Tax Act and applies identically under Quebec tax law. In simple terms:

• You sell your North Shore triplex to your son for $300,000, when it is worth $750,000.
• Your son has an adjusted cost base (ACB) of $300,000 — the price he actually paid.
• You, the parent, are deemed to have received $750,000 as proceeds of disposition. Your capital gain is calculated on that amount.
• Result: you pay tax on the full $450,000 gain while having received only $300,000. The difference comes out of your pocket.

This trap is especially costly for owners of North Shore multiplexes whose value has risen sharply since the initial purchase. A plex bought for $250,000 twenty years ago that is worth $800,000 today represents a potential capital gain of $550,000 — and selling to a child does not erase it, even at a symbolic price.

Source: Revenu Quebec — Owner of a rental property

Capital gain and CCA recapture on your North Shore multiplex

Two separate tax items hit at the same time when you transfer a plex to your children: the capital gain (50% included in income) and the depreciation recapture (100% included in income). The second is often overlooked but can exceed the first in absolute dollars.

When you dispose of an income property on the North Shore — whether a duplex, triplex, quadruplex or larger multiplex — two separate tax charges come into play:

The depreciation recapture arises because you claimed CCA (capital cost allowance) on the building over the years, reducing your UCC. When you dispose of the building at its FMV, the excess of the proceeds allocated to the building over the UCC is fully recaptured and taxed at 100% — not at 50% like the capital gain.

Capital gains calculator — ImmoMulti Estimate your capital gain and CCA recapture in 2 minutes, for your North Shore plex.

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No tax rollover for your children: the key rule

Canadian law provides an automatic rollover at cost (with no immediate capital gain) for transfers of rental property between spouses. This mechanism does not exist for adult children. Transferring to a child always triggers the taxes at the time of the transfer.

Many North Shore plex owners wrongly assume that transferring to their children will get the same tax treatment as transferring to their spouse. It does not:

The qualified farm property case is sometimes wrongly cited as an escape hatch for North Shore plex owners. But a duplex, triplex or multiplex rented to residential tenants does not meet the strict criteria of the "qualified farm or fishing property" definition under the Income Tax Act. Do not rely on this exception without consulting a tax specialist who focuses on real estate.

To learn more about tax-deferral strategies when selling your building, see our guides on the family trust to hold an income property and the estate freeze of your real estate portfolio, which cover distinct planning mechanisms.

Source: Canada Revenue Agency — Capital gains and losses

Certified appraisal, mortgage financing and the notary's role

Before transferring a North Shore plex or multiplex to a family member, three practical steps are essential:

1. The independent certified appraisal: protection for both parties

The CRA and Revenu Quebec can challenge the declared fair market value if it does not match the market. Without a professional appraisal, the value the tax authorities use could be higher than the one you declared — increasing your capital gain and CCA recapture accordingly. An appraisal report signed by a certified appraiser who is a member of the Ordre des evaluateurs agrees du Quebec (OEAQ) is your best defence. For North Shore multiplexes (Terrebonne, Mascouche, Blainville, Saint-Jerome, Boisbriand, Repentigny), this is all the more important because prices have risen sharply since 2018.

2. The buyer's (your child's) mortgage financing

If your child obtains institutional financing to buy your income property, the bank or credit union will do its own appraisal. If there is a gap between the bank's appraisal and the agreed sale price, financing will be capped at 80% of the value assessed by the institution (for a building of 5 units or more, commercial rules apply). A vendor take-back (seller financing) can bridge the gap, but it does not change your tax obligations: the capital gain is calculated at FMV, whether you receive the price in cash or over 10 years.

3. The notary: drafting the deed and verifying the rights

In Quebec, every real estate transfer must be recorded by a notary. The notary makes sure that the real rights (mortgages, servitudes) are properly handled and that the deed faithfully reflects the terms negotiated between you and your child. They also advise on whether to include certain protective clauses (right of redemption, stipulation for the benefit of a third party, etc.).

Welcome tax and other transfer costs between relatives

The welcome tax (real estate transfer duties) is calculated as a percentage of the transaction value and can amount to several thousand dollars on a North Shore multiplex. However, Quebec's Act respecting duties on transfers of immovables provides exemptions for certain transfers between close relatives. A direct transfer from a parent to their child (or from a child to their parent) may, depending on the terms of the transaction and your notary's interpretation, qualify for an exemption from transfer duties.

This exemption does not apply automatically in every situation: the terms (price, family relationship, ancillary conditions) can change how it is characterized. Explicitly ask your notary to confirm whether this exemption applies to your specific transfer. If it does, the savings can range from $10,000 to $30,000 or more depending on the value of your North Shore plex.

You can use our welcome tax calculator to estimate the transfer duties that apply to your transaction.

Beyond the transfer duties, the other transfer costs include:

• Notary fees for drafting the deed of sale
• Discharge and registration of mortgages (if the property is refinanced by the buyer)
• Fees of the tax specialist or CPA for planning and filings
• Certified appraisal report (typically $800 to $2,500 for a multiplex)

When selling your plex to a third-party buyer can be more advantageous

Paradoxically, selling your North Shore multiplex to an outside buyer can sometimes serve your family goals better than a direct transfer to your children. Here's why:

• Same tax, plus cash: the tax is practically identical (capital gain at FMV in both cases). But by selling to a third party at market price, you get the full value in cash. You can then give some to your children, fund their down payment on another property, or fold it into your estate planning — with far more flexibility.
• No complications with the CRA: an arm's-length transaction at market price does not expose you to an FMV review by the tax authorities. The sale value is the FMV, by definition.
• Family relationships preserved: managing a rental building on the North Shore can create tension between owners and tenants. If your children are not ready or do not want to manage plexes, involving them in an illiquid and demanding asset can create friction.
• A financial, not a real estate, inheritance: passing on liquid capital can be more useful to your children than leaving them a mortgaged building with management obligations.

If you are considering selling your plex or multiplex on the North Shore, also see our guide on depreciation recapture at sale and our calculation tools to make an informed decision.

Get a direct offer for your North Shore plex ImmoMulti buys multiplexes — duplexes, triplexes, quadruplexes and larger — across the entire North Shore, without delay.

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