A Real Estate Gift Of Equity Letter is essential in Canadian property transactions where a seller transfers property to a related party (typically a family member) at below market value. This document is particularly relevant in today's real estate market where family assistance in property acquisition is increasingly common. The letter must detail the property's fair market value, the agreed sale price, and explicitly state the gift amount, serving as crucial documentation for mortgage lenders who often require proof of the relationship and gift details. It's vital for tax purposes as it documents the non-arm's length transaction and helps establish cost basis for future capital gains calculations. The document must adhere to provincial property laws and federal tax regulations, with specific requirements varying by province. It's commonly used in parent-to-child property transfers, family succession planning, and other related-party real estate transactions.
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1. Letter Date and Address Block: Current date and complete contact information for both the donor and recipient
2. Property Identification: Full legal description and physical address of the subject property
3. Parties Declaration: Clear identification of the gift donor and recipient, including their relationship
4. Value Statement: Declaration of the property's fair market value, agreed sale price, and the calculated gift of equity amount
5. Gift Declaration: Explicit statement declaring the intentional gift of equity and its voluntary nature
6. Terms and Conditions: Any specific conditions attached to the gift of equity
7. Signatures and Witnessing: Space for all parties to sign, with witness requirements as per provincial regulations
1. Mortgage Lender Statement: Required when the gift of equity is being used for mortgage down payment - includes specific lender-required language
2. Tax Implications Acknowledgment: Optional section acknowledging that both parties understand potential tax implications
3. Family Agreement Declaration: Used when the transaction is between family members to confirm the nature of the relationship
4. Future Claims Waiver: Optional section where the donor waives future claims to the gifted equity
5. Prior Gifts Declaration: Used when there have been previous gifts between the parties that need to be disclosed
1. Property Appraisal Summary: Recent professional appraisal details supporting the stated market value
2. Gift of Equity Calculation: Detailed breakdown showing how the gift amount was calculated
3. Relationship Documentation: If required by the lender, documentation proving the relationship between parties
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