Personal Finance

tax question: capital gains on eventual house sale?

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  • Apr 27th, 2017 12:29 pm
[OP]
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Jan 9, 2010
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tax question: capital gains on eventual house sale?

Hi, quick tax question.

From 2007 until October 2015, my wife and I lived in a condo in Nova Scotia that was our principal residence. We then moved to Alberta, lived in my sister-in-law's condo for six months, then bought our own house in Alberta in March 2016. We have been trying to sell our Nova Scotia condo since October 2015, with no luck so far--the RE market is horrible in Nova Scotia. We aren't renting out the NS condo; it's just dormant waiting for a sale.

For our 2016 taxes due this month, do we have to report a "change in status" of our NS condo from "principal residence" to "non-principal residence" (or whatever the tax term for that is)? And when we eventually do manage to sell our condo, will we get dinged with capital gains tax on the sale proceeds?
9 replies
Sr. Member
Nov 13, 2013
611 posts
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You should be ok. You get to value it in 2015 and pay capital gains on any gain since then minus expenses. In other words the first 5-6 % of gains will be offset by real estate and legal fees. It sounds like it hasn't gone up much if at all. You need to sell it for what it's worth which is obviously a lot lower than your current asking price.
[OP]
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Jan 9, 2010
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Right, I get that, thanks. My main question is, do I need to report to CRA (for 2016 tax purposes) that the condo is "no longer my principal residence"?
Member
Aug 17, 2008
437 posts
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Quebec
canadave wrote:
Apr 21st, 2017 10:02 am
Hi, quick tax question.

From 2007 until October 2015, my wife and I lived in a condo in Nova Scotia that was our principal residence. We then moved to Alberta, lived in my sister-in-law's condo for six months, then bought our own house in Alberta in March 2016. We have been trying to sell our Nova Scotia condo since October 2015, with no luck so far--the RE market is horrible in Nova Scotia. We aren't renting out the NS condo; it's just dormant waiting for a sale.

For our 2016 taxes due this month, do we have to report a "change in status" of our NS condo from "principal residence" to "non-principal residence" (or whatever the tax term for that is)? And when we eventually do manage to sell our condo, will we get dinged with capital gains tax on the sale proceeds?


Change in status is only when you go from a principal to a rental property so there is no status change in your case.

CRA give 1 'free year' when you sell a principal residence. So lets say you sell in 2017. You can declare it as a principal residence for 2007 to 2016. With the free year you cover all the years so no capital gain.
Same for the Alberta house, 2017 to 20xx, with the free year you cover all the years you owned the house.
Last edited by sr79 on Apr 21st, 2017 10:25 am, edited 1 time in total.
[OP]
Sr. Member
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Jan 9, 2010
657 posts
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sr79 wrote:
Apr 21st, 2017 10:25 am
Change in status is only when you go from a principal to a rental property so there is no status change in your case.

CRA gave 1 'free year' when you sell a principal residence. So lets say you sell in 2017. You can declare it as a principal residence for 2007 to 2016. With the free year you cover all the years so no capital gain.
Same for the Alberta house, 2017 to 20xx, with the free year you cover all the years you owned the house.
Oh okay. Is that the case even though when we sell it, it will have been more than one "calendar year" since it was no longer our principal residence? In other words, from March 2016 until, let's say, June 2017, when we hopefully sell the house, that's more than one calendar year. However, from a "tax year" perspective, are we saying we could argue that the NS condo was our "principal residence" for part of "tax year" 2016 (January to March), and that we disposed of it in tax year 2017, so thus since it's within one "tax year", we don't owe capital gains?
Member
Aug 17, 2008
437 posts
161 upvotes
Quebec
From a tax perspective its still a 'principal residence', you currently have 2 'principal residence'.
When you sell 1 you have to declare years you designate it as a 'principal residence'. you cant declare the same year twice. So as i said if you sell in 2017, you can declare years 2007-2016, with the +1 year rule you will have no capital gain because you cover all the years you owned the residence
Newbie
Apr 26, 2017
4 posts
Hello,

Intention is the key area of tax law with regard to property. There is no time limit specified between the date of purchase and the date of sale, so no matter how long a piece of land is held, if it was acquired for the purpose of subsequent resale, the eventual sale proceeds are to be included in income.
[OP]
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Jan 9, 2010
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I'm not sure that's the case. Do you have a source for that?
Deal Addict
Aug 30, 2011
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Ottawa
lincolnboland wrote:
Apr 27th, 2017 1:08 am
Hello,

Intention is the key area of tax law with regard to property. There is no time limit specified between the date of purchase and the date of sale, so no matter how long a piece of land is held, if it was acquired for the purpose of subsequent resale, the eventual sale proceeds are to be included in income.
canadave wrote:
Apr 27th, 2017 9:56 am
I'm not sure that's the case. Do you have a source for that?
No, intention is not the key item. Reality is. Bought a house intending to live in it, but rent it out instead? = a rental property, not principal residence. Otherwise, all kinds of people would be claiming they "intended" to do something which didn't happen :)
Deal Expert
Feb 29, 2008
15803 posts
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Montreal
canadave wrote:
Apr 21st, 2017 10:17 am
Right, I get that, thanks. My main question is, do I need to report to CRA (for 2016 tax purposes) that the condo is "no longer my principal residence"?
That's a good question. I know now all sales, whether exempt or not, must be reported as of 2016. The exemption is no longer automatic. I don't know if useage change needs to reported. I know CRA wants to track all property dispositions, deemed or real. After my father's death, his share of the house was transferred to my mom, and we had to report the disposition (and exemption) of his 50%.

I would check on CRAs web site for the new form.

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs ... u-eng.html

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