Humber/Ontario Real Estate Course 3 Exam Practice

To ensure Seller Munro’s capital gain tax is paid, Buyer Kassis should:

1. Agree to pay a portion directly to the tax authority

2. Have Munro's pledge included in a formal statement

3. Obtain a lawyer’s declaration regarding residency

4. Seek the applicable tax credit upon property transfer

5. Trust Munro’s assurance of payment post-sale

6. Withhold a corresponding amount for tax payment

The correct answer is: Seek the applicable tax credit upon property transfer

The correct approach for ensuring Seller Munro’s capital gain tax is addressed involves withholding a corresponding amount for tax payment. This method is practical and safeguards the buyer against potential tax liabilities that could arise if the seller fails to pay the capital gains tax at the time of the property transfer. In real estate transactions, especially regarding dispositions where capital gains may occur, it is prudent for the buyer to hold back a certain sum from the purchase price. This amount, when retained, can be used to meet any outstanding tax obligations owed by the seller, particularly in cases where the seller may not fulfill their tax payment responsibilities. This approach could prevent complications for the buyer down the line, ensuring that tax obligations are met before the property is fully transferred. Other options, while they may serve some purpose in the transaction process, do not ensure the tax payment as effectively. For instance, relying on a lawyer’s declaration regarding residency does not directly address capital gains liability. Similarly, a tax credit sought upon property transfer would not have immediate implications for ensuring the seller's tax is settled. Trusting Munro’s assurance of payment post-sale carries risk, as there may be no guarantee of compliance. Thus, the most reliable way to ensure that Seller Munro's capital gain tax is