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What you need to know about the principal residence exemption
The principal residence exemption provides a generous tax break. However, there are some rules you need to be aware of.
The principal residence exemption provides Canadian taxpayers with a generous tax break, possibly one we take for granted. In other countries the gain on the sale of a residence is not always completely free of tax. In the United States, for example, only the first $250,000 is exempted. For Canadian tax purposes, there is no monetary limit on the size of the capital gain that can be excluded from your income.
However, there are restrictions on the size of the property that can be covered by the exemption. The magic number is ½ hectare. If the land is in excess of ½ hectare, the excess portion will generally not be considered to be part of your principal residence and will not be covered by the exemption. There is an exception to this general rule if you can make a case that the excess portion was necessary to the use and enjoyment of the housing unit as a residence. This could possibly be the case if there was a minimum lot size restriction in effect at the time the property was acquired. However, recreational appendages, such as a stable for your children’s ponies, would not be considered necessary to the use and enjoyment of the housing unit.
For Canadian tax purposes, there is also no minimum period for which you have to own the property. In order to designate it as your principal residence for a particular year, you need only have inhabited it at some time during that year. As a result, you have the choice of designating a seasonal residence such as a cottage instead of your primary residence if that would be more beneficial. However, the occupancy requirement must be met for each year that you want to make the designation. For example, if you owned a property from 2003 to 2012, but only occupied it in 2003 and 2004, you would only be able to designate it as your principal residence for two of the ten calendar years during which you owned the property. When determining the amount of your exemption, you are allowed an additional freebie year in the proration calculation, so that in this example 30 per cent of the gain would be exempt, calculated as (2 + 1) ÷ 10.
Unfortunately, you can only claim one property as your principal residence regardless of how many properties you might have occupied during the year. For 1982 and subsequent years, you are also limited to one per family unit. A “family unit,” for this purpose, includes your spouse or common-law partner (unless you were separated throughout the year) and children under 18 who are not married or in a common-law relationship. So if you do have more than one property that you can designate, you have to make a choice. However, it does not have to be made on an annual basis. You can wait until you sell one of your properties and decide then for which of the years you owned it you want to make the designation.
If you convert a property from personal-use to an income-producing use, you are deemed to have disposed of it for its fair market value at that time. This would happen if you stopped living in your home and started to rent it out. However, you can elect for the change of use not to have occurred. This election, which is called a 45(2) election, also allows you to continue to designate the property as your principal residence for up to four years even though you are no longer occupying it. This four-year period is extended to six when you have moved as the result of a relocation by your employer. However, you must still report the rental income from the property and you cannot claim a deduction for capital cost allowance if you want the election to continue in effect. The election must be made with your tax return for the year in which the change of use occurs.
A deemed disposition will also occur if you convert a rental property into your principal residence. In this case you can make a parallel election under subsection 45(3) which will defer the capital gain resulting from the deemed disposition until you actually sell the property. You will also be able to designate it as your principal residence for up to four years prior to the deemed disposition. The election is made in the year in which you ultimately dispose of the property. Again it will only be allowed if you never claimed capital cost allowance during the years you were renting it out.
The Canada Revenue Agency provides Form T2091 Designation of a Property as a Principal Residence by an Individual for designating a property as your principal residence. However, the form only has to be filed if there is a capital gain to be reported on the property in the year you dispose of it. If you are able to designate the property as your principal residence for all the years you owned it, there will be no capital gain to report and Form T2091 will not be necessary.
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COMMENTS
Hi,
I would like to rent my condo that I have live in less than one year, I want to designate my property as my principle residence as if I had sold it at fair market value today. How do I do that? Can I send in Form T2091? How do I provide the fair market value to CRA? I do not want to wait until I sell it lets say 3 years from now and CRA says its too late. That has happened to my family before when we lived in a condo for 3 years and rented for 1 year but were advised and paid capital gains on the full amount.
Carrie
Carrie – If you stop living in your principal residence and start renting it out, you are deemed to have disposed of it for its fair market value. However, if you can designate it as your principal residence for all the years you owned it, the capital gain will be exempt. As a result, you are not required to report it on your 2012 tax return and are not required to file Form T2091.
What you are required to do on your 2012 tax return is file a 45(2) election if you want to defer the deemed disposition until you sell the property and continue designating it as your principal residence for another four years. In order to do this, attach a signed letter to your tax return providing a description of the property and stating that you want subsection 45(2) of the Income Tax Act to apply. You will then file Form T2091 in the year you sell the property assuming there is a taxable capital gain at that time.
If you receive rental income from the condo in 2012, you must also file a statement of rental income and expenses with your tax return. ~PC
Hello. I am planning to buy a house which will initially be used as a rental property. I then plan on converting it into my principal residence in 2 to 5 years. Should a purchase the property under my personal name or under a holding company I own. Thanks.
AK
Ak – Rental income is not eligible for the small business corporate tax rate, so if you are anticipating a profit from your rental property it is generally not advantageous to hold it in a corporation. If you are anticipating losses, it depends on whether your losses can be more effectively utilized in your holding company or on your personal tax return. If you own your rental property personally, you will be able to make a 45(3) election when you convert it to your principal residence. This will allow you to defer the capital gain resulting from the change of use until you actually sell it. You will also be able to designate the property as your principal residence for up to four years prior to the change of use (assuming you were not already designating another property for the same period). If you intend to do this, do not claim capital cost allowance on the property during the period you are renting it. ~PC
[...] http://www.hrbtaxtalk.ca/blog/what-you-need-to-know-about-the-principal-residence-exemption/ [...]
Good afternoon,
I bought a house last year, and rented it out later (same year).
I’d like to designate it as my principal residence for year 2011. Unfortunately, I didn’t file a 45(2) with my 2011 tax return.
My question is if it is ok I can file a 45 (2) right now to designate it as my principal residence last year.
Thank you!
Angela
Hello Angela. You are supposed to file the 45(2) election with your tax return. If you omit to do so, you can request a late election under the Taxpayer Relief provisions. However, these are not granted automatically. Typically you have to convince them that you were unaware of the provision, even though they took a reasonable amount of care to comply with the law, or that the reason you did not do it on time was due to circumstances beyond your control. Even if they do grant it, they still charge you a $100 per month penalty for every month it is late.
In any event, I am not sure that a 45(2) election would be appropriate in your situation. It is only available if you first used the property for personal use and then began renting it out. It is not clear from your question whether you ever occupied it in the first place. If in fact you did occupy it, you will be able to designate it as your principal residence for 2011 without having to make the election (although you will not be able to continue designating it for the next four years). ~PC
I plan to buy my first home and let the current renters stay in it for 2 or 3 years before moving in. Can I make a 45(2) election immediately (since I will be renting myself and have no other principal residence) or will I need to live there first? Thanks!
Renee – You can only make a 45(2) election when you convert a home from a personal-use property to an income-producing property. So the short answer is yes, you would need to live in it first.
What if one pays back all the CCA, even with interest added on and, then invokes45(3)?
Fred – unfortunately, no. If you have claimed CCA you cannot make the 45(3) election. You do not have the option of paying the CCA back. -PC
I have a condo that I used as a principal residence that had a change of use to a rental property.
I understand that the condo is deemed disposed at FMW. The FMW was greater than the original cost of the condo.
1. What is the capital cost calculation? is it original cost + 1/2 the capital gain? (because I have the principal residence exemption)
2. The condo was a principal residence for all previous years and now it will be used as a rental property. There is a deemed disposition in the year that there was a change in use. Do I have to file a T2091 or any other form to indicate or evidence the deemed disposition of the condo at FMW due to the change in use?
Re: Carrie – If you stop living in your principal residence and start renting it out, you are deemed to have disposed of it for its fair market value. However, if you can designate it as your principal residence for all the years you owned it, the capital gain will be exempt. As a result, you are not required to report it on your 2012 tax return and are not required to file Form T2091. -
You mention that you “if you can designate it as your principal residence for all the years you owned it” .. is this in reference to the time period prior to the date of the “deemed disposition” OR the the entire time that the property is owned?
Sorry last question – how do we inform CRA of the deemed disposition and the FMW of the principal residence at the time of the deemed disposition?
Andrea – If you convert your principal residence to a rental property without making a 45(2) election, you are deemed to have disposed of it for its FMV in the year of conversion. This will not result in a taxable capital gain because you will be able to designate it as your principal residence for all the years you owned it up to that time. The FMV of the property at the time of conversion will also constitute the new adjusted cost base of your rental property for the purpose of calculating the capital gain when you sell it in the future.
However, if you make a 45(2) election in the year of conversion, you are deeming the change of use not to have occurred. As a result, there is no deemed disposition until you actually sell the property, Its adjusted cost base will continue to be its value at the time you purchased it. When you finally sell the property, the capital gain will only be partially exempt since you will not be able to designate it as your principal residence for the years you rented it out. You will use Form T2091 to calculate the taxable portion of your capital gain.
Form T2091 need only be filed when you cannot designate the property as your principal residence for all the years you owned it up to that time. -PC
I bought my first home with my brother in 2008. I lived in it until 2012. In 2012, I bought another home with my mother, and am now living in that 2nd home, while my brother continues to live in the 1st home. We both still own the first home.
It is possible that my brother and I sell the 1st home before I ever sell my second home, but nothing is certain.
I am not sure how to handle my principle residence designation.
Can you give any advice?
Shanna – you and your brother each own a 50 per cent interest in your first home. When you sell it, you will each have a capital gain with respect to your half. Assuming you were 18 or older during the years from 2008 to 2012 when you lived in the house, you will be able to designate your half as your principle residence for those years. Your brother will also be able to designate his half as his principle residence for the same years. However, since you are no longer living in the property, you will not be able to designate your half for any subsequent years. Since your brother is continuing to live there, he will still be able to designate his half.
Since you did not start to rent out your half of the house when you moved out, there was no change in use of the property in 2012. There is therefore no deemed disposition. You do not have to file form T2091 until such time as you sell the property. ~PC
I rented out a portion of my house for about 4 years, while maintaining it as my own primary residence the whole time. I did claim the rental income each year (minus the appropriate % of expenses) but did not claim CCA. I sold the house in 2012. Do I have to report capital gains?
Christy – you will need claim the capital gains on the rental portion of your house for the four years you rented it out. You do this based on the square footage the rental took up in your home. So if your rental apartment took up 10% of your home, you would claim 10% of your capital gains for the four years you rented your home. You can also subtract 10% of your real estate and selling costs to help reduce your capital gain as well as any capital expenditures you made to the rental area (i.e. renovating the kitchen or bathroom). ~CH
I bought a duplex in 2009 with the upstairs already rented while the downstairs was my primary residence. I have reported rental income each year. I stopped renting the upstairs in 2012 but it remains my primary residence [I now connected the two levels by a staircase and declared it as one dwelling]. What happens now?
Oliver – you can make a 45(3) election to defer the change in use of the upstairs from income-producing to person use. You make this election in the year you sell the property. Part of the capital gain attributable to the upstairs will be covered by the principal residence exemption based on the number of years in which you occupied the property during the years you owned it. The full portion of capital gain attributable to the downstairs will be covered by the exemption (assuming you occupied it for all the years you owned it). ~PC
Good evening. We lived in a our primary residence for 3 years, have been renting it out the last 2.5 years. I don’t think I make any declaration cra. However we have been claiming the rental income on my taxes. ( including the expenditures for work done, repairs,etx ) Does this mean if I sell the residence this spring, I am liable for capital gain for the last 2.5 years? Thanks for your help.
Paul – Yes, if you did not make a 45(2) to defer the deemed disposition, you will be taxable on the accrued capital gain since the change in use. ~PC
Base on the Editor , TaxTalk -March 28,2013
Paul- re 45(2)
may I ask where I can find the document 45(2) and can I file it with HR block netfile program?
many thanks
Rico
Rico – there is no election form in the software. To make the election, you have to write a letter to the CRA stating that you are making the election under 45(2) and providing details of the property. Make sure you include your full name and social insurance number. Mail the letter to the tax centre that services the area where you live. Make sure you mail it by the deadline. ~PC
Hi, there,
Me and my husband were seperated 4 years ago. He bought a house himself and I continue live in our original home. 1 years ago we reconciled and moved back together and lived in his house (with our original home vacant for that year). late last year he sold his house (with a capital gain) and we both moved back to our original home.
I have 2 questions about the tax treatment for the selling of my husband’s house:
1). For separated people, are we each allowed to have a principle resident?
2). if so, my husband wants to deem his house as his principle resident for the past 4 years and use the tax exemption. In this case, for 1 year that I lived with him, what is the status of our original home? if it was not my principle resident for that year, is it a investment property or personal use property?
Thanks a lot!
Ana
Ana – yes, you can designate different properties for a particular year if you were separated. However, you must have been separated throughout the year and you must have been separated under a judicial separation or written separation agreement. This means you will not be able to designate different properties in the year you separated or the year you reconciled. However, there is a bonus year in the calculation of the principal residence exemption designed to take care of this overlap so that both properties would normally be fully covered.
However, in your case, the situation is complicated by the fact that there was one year in which you did not occupy the original house. This means you will not be able to designate it as your principal residence for that year when you eventually sell it. Part of the capital gain will therefore be exposed to tax. How much will be exposed depends on how much longer you own the property. For example, if you ended up owning it for 20 years, only 1/20 of the capital gain would be subject to tax when you sell it.
In the year the property was vacant, you did not receive income from it. There was therefore no change of use which would have resulted in a deemed disposition; it remained a personal-use property during that period. ~PC
Further explanation needed to your answer to
Andrea – February 27, 2013
“Sorry last question – how do we inform CRA of the deemed disposition and the FMW of the principal residence at the time of the deemed disposition?
Editor, TaxTalk – March 6, 2013
Andrea – If you convert your principal residence to a rental property without making a 45(2) election, you are deemed to have disposed of it for its FMV in the year of conversion. This will not result in a taxable capital gain because you will be able to designate it as your principal residence for all the years you owned it up to that time. The FMV of the property at the time of conversion will also constitute the new adjusted cost base of your rental property for the purpose of calculating the capital gain when you sell it in the future.
———————————————————————————–
do you mean that we can choose to change of use our PR to a rental property without 45(2) election?
Rico – if the full amount of the capital gain is exempt because it is covered by the principal residence exemption, you do not have to report it on your tax return. The deemed disposition will only be relevant for determiming the adjusted cost base when you actually dispose of the property in the future. ~PC
I currently live at home but am looking into buying a property to rent out. It will be a cash-flow positive property. If i was to occupy it “one day a year” between renters would this be enough to scrape by the primary residency requirements? I would hope to be able to have it as my primary residence for both mortgage and tax purposes. Would this also mean I would not disclose my rental income/expenses to the CRA? Thank you for your help!
Daniel – you have to reside in a property before you can apply for the principal residence exemption. You may have trouble convincing the Canada Revenue Agency that living in the property for a day before beginning to rent it out established residency. If you rent the property at Fair Market Value, you are required to report your income and expenses on a T776 Form as part of your personal return. Even if you are able to apply for the principal residence exemption on your property, rental income is not tax exempt. If you do not rent the property at Fair Market Value, then you do not report your income or expenses. ~CH
we lived in our duplex for 2 years prior to moving into our new home in 2008. in 2006 that duplex was purchased for ~$270k but had an approximate value of $400k when we converted it to an investment property. over the next 4 years, the market declined, and we finally sold the property last year for $310k. my accountant is now saying that i’m on the hook for capital gains of $40k based on the sale of $310 vs the purchase of $270. does this make sense, considering the property was at its highest value when we were living in it as our primary residence, and has done nothing but declined in value since converting it to a revenue source?
KD – if you converted the property to an income-producing use in 2008 and did not do a 45(2) election, there was a deemed disposition in 2008. The new ACB resulting from this deemed disposition should be the FMV of the property in 2008. If the value of the property subsequently declined, we would agree with you that you should not have a capital gain. We would suggest you clarify this with your accountant. ~PC
I bought a condo in May 2006 with $211K and lived there until Aug 2011. The market value at 2011 was $170K. I did not sell it since the market value was too low. I rent it out on Aug 2011 until now. I was not aware of the 45(2) when I filed the 2011 tax return. Now, I am thinking about selling the condo which is about $220K.
I bought the new condo on Aug 2011 and live there since. The price increase quite a lot since I bought it.
What is your advice for me in terms of paying less capital gain?
RY – - the only thing I can suggest is to try and file a late 45(2) election under the Taxpayer Relief provisions. However, these are not granted automatically and there is also a $100 per month penalty for every month the election is late (which can be waived if the taxpayer can demonstrate financial hardship). The procedures for requesting a late election can be found in paragraphs 45 to 63 of Information Circular IC07-1 at this link: http://www.cra-arc.gc.ca/E/pub/tp/ic07-1/ic07-1-e.html#P203_25773. ~PC
I bought a house in mid-2010 and rented out the basement in Oct 2010. The tenant left in 2012. If I elect under 45(3), there will be no capital gain since the basement is considered my principal residence from 2010 to 2012. Is this correct?
Kevin – If you decide to rent out part of your home, the CRA will not normally apply the deemed disposition rule as long as the following conditions are met:
1. The income producing use is ancillary to the main use of the property as a residence;
2. There is no structural change to the property; and
3. You do not claim capital cost allowance on the property.
If these conditions are met, there is no need to file a 45(3) election since there is no deemed disposition to defer. ~PC
Following to my previous question regarding to 45(3) election, if in future I sell the house, is there any capital gain?
Kevin – no, the whole house will be covered by the principal residence exemption as long as these conditions are met. ~PC
Hi, I bought a townhouse as I was going to get married but the marriage was called off. I moved into the townhouse for abt 3.5 months and then decided to move back with my family and rent the townhouse. I have read the blog and I am confused as to what I should do. I understand that there is definitely a change in use – how do I designate that it is a change in use on the return? Would I just file T2091?
If I decide to use s. 45(2), if I understand correctly I do not need to file a change of use or file T2091 but just send a letter to CRA with required details – is the gain during this four year period still taxable even if this is the only house I can designate as my principal residence?
If I do not move in within four years what happens? I guess that’s what I m confused about i.e. should I opt for 45(2) or not?
Thanks for your help
Ahmed
Ahmed – I am sorry to hear about your wedding. To make the 45(2) election, attach a letter to your tax return for the year in which the change of use occurs. Describe the property and state that you want subsection 45(2) of the Income Tax Act to apply. If you are filing the return electronically, send the letter to the taxation centre which processes your tax return. Make sure the letter has your name and social insurance number on it and make sure it is mailed before the filing deadline. The deemed disposition resulting from the change in use will then be deferred until the year you sell the property. When you make a 45(2) election you can also designate the property as your principle residence for another four years even though you are not living in it (assuming you not designating another property as your principal residence for the same period). However, this designation does not have to be made until the year you sell the property. You do not have to move back into the property in order to make this designation. ~PC
I bought a condo in 1990 around 80K and it was my principal home. Then I became common-law in 2002. At that time, my common-law partner also owned a house (her principal home and still is currently). I was told that I should designate my common-law spouse’s home as my principal residence using T2091 because the value of her home is greater. So I did that. In year 2012, I did some renovation to my condo and I sold it for 200k.
I am confused about whether I need to report the sale of my condo or not because it was my principal home for a long time before I changed it and Canada Revenue’s information is very confusing. Also, did I do the right thing about designating my common-law partner’s home as my principal residence? If not , can I change it? I feel like I did something wrong here. Please help. Thank you.
John – You only need to file Form T2091 in the year you dispose of your home and only if there is a capital gain to report (which would not be the case if you can designate the home as your principal residence for all the years you owned it). So I am not clear of the circumstances which led you to have already designated your partner’s home as your principal residence. I am also not clear about which home you have actually been living in with your partner since 2002 and whether or not you were renting out the other home. If you want to designate your own home as your principal residence for any year since 2002, you must have occupied it at some time in that year. Also, since you are only allowed to designate one home per family, it would also have to be your partner’s principal residence for that year. If you did some renovations to your condo, the cost would be added to your ACB. This would reduce your capital gain when you sell it. ~PC
Hi… I just sold my property last April 2012… We’ve lived there since 2005 and had to rent it out from Jan 2010 to Sept 2011… I’ve been filing rental income for both years but have not made any election for Subsection 45(2)… I also did not claim any CCA… am I eligible for PRE, if so how do I go about it, or should I file a capital gains… thanks
Liz – since you did not file the 45(2) election, you will be taxed on the gain (if any) that accrued from January 2010 to September 2011. At that time, you converted it back to your principal residence, so this would have triggered another deemed disposition. However, you can defer reporting that capital gain to 2012 by filing a 45(3) election with your 2012 return. ~PC
In 2012 I sold a foreign property which was co-owned with a friend. This property was my principal residence from 2001 until I immigrated to Canada in mid-2007 (triggering an adjusted cost base). This property continued to be used as the principal residence of the co-owner. Renting the property for income was not possible. For capital gains tax purposes I was planning to treat this property as my principal residence until mid-2009, at which point I had bought a condo in Canada with my partner after renting for two years. No election of Subsection 45(2) was made in 2007 as I was not planning on, and subsequently did not, produce rental income. Can you confirm whether this assumption is correct and that I would need to file a late election of Subsection 45(2) in order get CGT relief (due to principal residence) on the capital gain since 2007?
Brendan – as you were a non-resident prior to 2007 and the property was not located in Canada, you are not taxable on any capital gain accrued on it up until then. In 2007, when you became a resident of Canada, you are deemed to have acquired your half of the property for its FMV at that time. Since you have not occupied the property since 2007, you will not be able to designate it as your principal residence for any subsequent years and will therefore be taxable on the full gain accrued from that time. Since you never rented the property out, an election under 45(2) is not possible. ~PC
Later this year (2013) I will be getting married. Currently, my fiancee and I both own and live in separate properties. Once married, I understand we can only designate one as primary residence. For the purpose of minimizing capital taxes though, can we designate either property our primary residence at the time of sale of one of them (provided the property we are not living in is vacant and not being rented out)? This question is to seek clarification to this section of the article:
“So if you do have more than one property that you can designate, you have to make a choice. However, it does not have to be made on an annual basis. You can wait until you sell one of your properties and decide then for which of the years you owned it you want to make the designation.”
Furthermore, if we do decide to rent out the other property, does this complete change our ability to make this decision?
Jack – congratulations. Yes, you do not have to decide on which years you are going to designate a property as a principal residence until the year you sell it. However, in order for a choice to be available, you must have occupied both of them at some time in the year. If you have two properties, but you only occupied one of them during all the years you owned them, you will not have a choice. The occupation rule ceases to apply if start renting out the property and you make the 45(2) election. If you make this election, you can defer the deemed disposition resulting from the change in use until the year you sell the property. You can also designate it as your principle residence for up to four years even though you did not occupy it – but only if you do not designate your other property as your principle residence for the same years. So this does give you a choice for four years. You must make the 45(2) election in the year you start renting it out. However, you do not have to decide on the principal residence designation until the year you sell one of the properties. ~PC
Hi I am a senior and haved lived in my house for over twenty yrs on 1 acre,there was no mortage as house was inherited,I am needing to move into a care faucitly and I am wondering if I will have to pay capital gains on my house. I am overwhelmed at all the infor above and was just looking for a simple answer
Thank u so much
Glenna – if it was your principal residence for all the years you owned it, the capital gain will be exempt from tax. Good luck with your move. ~PC
I purchased a home in 2005 and have been renting it out since then. My tenant just recently moved out in December 2012 and my Wife and I thought it would be a perfect down size home. We decided to renovate the home and we moved into it Feb 2013 now it is our principle residence. Is there a capital gain cost? and does the money I spent on doing the Reno a factor in reducing my costs
Sam – if you do not make a 45(3) election, the conversion to personal use will trigger a capital gain which you will report on your 2012 tax return. However, if you make the election, you can defer the deemed disposition until the year you sell the home. At that time you will file Form T2091 designating the years you occupied it as your principal residence. This will reduce the capital gain proportionately to the total number of years you owned the property at that time. The cost of your renovations will be added to the cost of the property, which will reduce your total capital gain. The 45(3) election must be filed in the year you sell your home. ~PC
Hello, I purchased my condo in 2005. I lived in it for 5 years (until 2010) before deciding to have 3 roommates, which brought my personal use down to 25% of the unit. After doing that for 1.5 years I moved out January 1, 2012 and tenants have been renting out the whole place since. I am filing a subsection 45 (2) election for 2012. I didn’t make any CCA deductions in any of the years and reported all rental income/expenses. I designated my condo as my principal residence each year I have owned it. The only tax year I didn’t occupy it for any days of the year is 2011. Given the plus 1 year allowance in calculating capital gains when selling would that cover me for the one year I didn’t live there to avoid paying CG taxes? Suppose a scenario where I paid $300K in 2005 and sell for $520K in 2015, with a $20K disposition cost, bringing the capital gain to $200K. What would the capital gains be? Would it make a difference if I lived in the unit before selling in 2015 or not? Thanks in advance
Peter – If you own the property from 2005 to 2015 (11 years) and you designate it as your principal residence from 2005 to 2010 (6 years), you will have a capital gain of $72,728 to report in 2015, calculated as $200,000 x [(1+6) ÷ 11]. If you lived in the unit again before selling it, the number of years you could designate it as your principal residence would be increased and your capital gain would be reduced proportionately. ~PC
In 1989, my mother died leaving the family home ( on a 13 acre property in Nova Scotia) to all her children.
My sister has lived in the home since 1989.
Is there anything we need to do with respect to CRA’s 21 year deemed disposition rule?
Lynda – if the home was still owned by the estate (as opposed to the children as co-owners), it would be subject to the 21-year deemed disposition rule for trusts. However, if a beneficiary of the estate was living in the home, the estate could designate it as a principal residence. Any capital gain would therefore be exempt. If the estate was created in 1989, this should presumably been done in 2010. ~PC
COMMENT