capital gain on selling of short term rental property?

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Feb 23rd, 2018 3:57 pm

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Feb 22nd, 2018 11:06 am

gogozy [OP]: Sr. Member; Jul 11, 2007; 660 posts; 222 upvotes; GTA

Feb 22nd, 2018 11:06 am

capital gain on selling of short term rental property?

its tax season and I am searching for some answer.. we own our principle resident for 10 years, and moved out to a rental house during reno last year, (during reno the Ontario foreign tax took effect) .. kids like school and all the conveniences of new places, so we decided to stay in the rental, and rent out our principle resident after reno done. just after few month into a landlordhood, we now realizing really don't have time to deal with family, kids, career and tenants at the same time, we are now thinking of selling property (juut thinking..)... what is the best way to avoid capital gain tax?

I saw CRA rule that allow us to rent out principle resident and continue to make the property as designated principle resident. is there other way?
CRA link

or find way to calculate the capital gain during the rental period ? someone told me to get a appraisal of property; but we don't know if there is CRA's approved assessor ? and it's properly too late anyway, since we rent it out last year?

any suggestion or discussion is appreciated!

7 replies

Feb 22nd, 2018 12:59 pm

Ziggy007: Deal Fanatic; Mar 15, 2005; 5889 posts; 1602 upvotes

Feb 22nd, 2018 12:59 pm

You cannot just avoid the capital gains tax on the sale, the good news is you would only pay gains on the difference in price from when you vacated it until now, which in this down market shouldn't be much, if anything at all.

Feb 22nd, 2018 2:12 pm

gogozy [OP]: Sr. Member; Jul 11, 2007; 660 posts; 222 upvotes; GTA

Feb 22nd, 2018 2:12 pm

thanks, but to make a gain or loss, there would be an assessment, who is qualify to provide such services? property tax assessment or real estate agent?

also according to the CRA, one can avoid it, quote from CRA

"When you change your principal residence to an income producing use such as a rental or business property, you can make an election not to be considered as having started to use your principal residence as a rental or business property. This means, if you make this election, you do not have to report any capital gain when you change its use. However:

you have to report the net rental or business income you earn; and
you cannot claim capital cost allowance (CCA) on the property.

Feb 22nd, 2018 7:29 pm

BiegeToyota: Deal Addict; Dec 13, 2016; 4431 posts; 3978 upvotes

Feb 22nd, 2018 7:29 pm

gogozy wrote: ↑ thanks, but to make a gain or loss, there would be an assessment, who is qualify to provide such services? property tax assessment or real estate agent?

also according to the CRA, one can avoid it, quote from CRA

"When you change your principal residence to an income producing use such as a rental or business property, you can make an election not to be considered as having started to use your principal residence as a rental or business property. This means, if you make this election, you do not have to report any capital gain when you change its use. However:

you have to report the net rental or business income you earn; and
you cannot claim capital cost allowance (CCA) on the property.

I made an election and in no way does that release me from paying capital gains. The election is made if you move back to your property and make it a primary residence again. If you sell it, you still pay taxes.

Feb 22nd, 2018 8:10 pm

licenced: Deal Fanatic; Jul 3, 2011; 6517 posts; 3796 upvotes; Thornhill

Feb 22nd, 2018 8:10 pm

You should be fine with the primary residence election rules.

Even if you're denied the exemption it seems highly unlikely that the one year differential after capital costs for last year's renos and selling costs will put you in capital gain position.

A tax accountant can settle that question for you and well worth the couple hundred dollars for such piece of mind.

Feb 23rd, 2018 2:33 pm

gogozy [OP]: Sr. Member; Jul 11, 2007; 660 posts; 222 upvotes; GTA

Feb 23rd, 2018 2:33 pm

licenced wrote: ↑ You should be fine with the primary residence election rules.

Even if you're denied the exemption it seems highly unlikely that the one year differential after capital costs for last year's renos and selling costs will put you in capital gain position.

A tax accountant can settle that question for you and well worth the couple hundred dollars for such piece of mind.

thanks,
definitely will going to tax accountant!!

Feb 23rd, 2018 2:38 pm

gogozy [OP]: Sr. Member; Jul 11, 2007; 660 posts; 222 upvotes; GTA

Feb 23rd, 2018 2:38 pm

BiegeToyota wrote: ↑ I made an election and in no way does that release me from paying capital gains. The election is made if you move back to your property and make it a primary residence again. If you sell it, you still pay taxes.

were primary resident exempted from paying capital gain tax? or you mean if I would be subject to capital gain if I sell it without moving back? (but I thought the election is to make the property looks like my primary resident even if i Do not live there?)

Feb 23rd, 2018 3:57 pm

Ziggy007: Deal Fanatic; Mar 15, 2005; 5889 posts; 1602 upvotes

Feb 23rd, 2018 3:57 pm

gogozy wrote: ↑ were primary resident exempted from paying capital gain tax? or you mean if I would be subject to capital gain if I sell it without moving back? (but I thought the election is to make the property looks like my primary resident even if i Do not live there?)

You pay capital gains on the increase in value while you were not living there.

For example you buy a house for 400K and start renting it out a few years later. At this point in time you should assess the fair market value of the home, lets say $600K. If in a few years you decide to sell the home you would pay capital gains on the difference between the sale price and the $600K valuation when the home became in income property.

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