They Died but the House Hasn't Been Sold — Is Tax Still Owed at Market Value? Vaughan Chinese-Speaking Wills Lawyer: Yes, Deemed Sold on the Date of Death

A parent passes away, the house hasn’t been sold, and the heirs ask me: since we haven’t sold it, do we owe tax? Can we deal with it when we sell?

Short answer: no. On the day of death, the tax authorities treat the house as already sold at that day’s market value. The tax owing doesn’t go away.

Does the tax clock wait for your listing?

No. Many people assume: no sale, no “income,” no tax. That’s the biggest misunderstanding of how this works.

Canada’s rule: on the date of death, appreciated property in the deceased’s name — houses, stocks — is deemed disposed of at fair market value for tax purposes. Whether you plan to sell or not, the CRA calculates the gain using the market value on the date of death, and the tax is figured right then.

Selling or not selling is your decision. Sell now, or hold and sell later — your call. But the tax is calculated on the value at death, not on the day you actually sell.

Are the probate fee and capital gains tax the same thing?

No. There are two separate amounts here, and they’re completely different:

First, the probate fee (Estate Administration Tax). When applying to the court for the estate certificate, the court charges a fee based on the total estate value — roughly one to two percent. It’s paid as a deposit with the application, and you have to front it yourself — it can’t come straight out of the estate. Once the estate is distributed, you’re reimbursed from the estate.

The Ontario government has a free calculator — enter the estate value and it tells you the amount: Ontario Estate Administration Tax Calculator

Second, capital gains tax. The house’s appreciation from purchase to the date of death is taxed, reported on the final tax return for the year of death.

One is a court fee, the other is tax owed to the CRA. Not the same thing.

Is it the same tax return if you deal with it while alive vs. after death?

No. Sell the house while alive, and the gain goes on that year’s personal return — you report it, you pay it.

Die with the house unsold, and the gain goes on the final return — filed by the executor with an accountant; the tax gets paid before anything is distributed.

There’s a third path: gifting money or property to your children while alive. Once gifted, it’s no longer part of the estate — no probate fee on it, and it doesn’t go on the final return, because the year of the gift already dealt with it. The recipient generally isn’t taxed just for receiving the gift. But keep the gift letter and transfer records — when it was given, how much — in black and white.

Does the will need to list every property?

No. The will doesn’t need to list every property. Your holdings change — buy, sell — and anything listed today needs amending tomorrow. The will just needs to say who gets what.

But keep your own asset list: what properties you own, which banks hold accounts, roughly how much is in them. Update it every six months or yearly, and give it to your executor. That’s the list the court will want when the certificate is applied for.

One more line: a Canadian will covers Canadian property. If you also own property in China, the will for that needs to be signed in China. I’ve covered same-person authentication and mother-to-child gifts in earlier articles — I won’t expand on it here.

When someone dies, the taxman doesn’t wait for the sale. The market value on the date of death is the number the tax is calculated on. The house can be sold slowly; the tax can’t.

Questions about wills and estate planning? Book an initial consultation (30 minutes, $220+HST). Call 647-930-6688.

This article is general legal information, not legal advice, and does not create a lawyer-client relationship.