Capital gains of rental turned principal 30 years down the road

That's not how it works.

You will trigger capital gains when there is a change of use, it's called deemed disposition, basically the tax is due now unless you elect and meet the requirements of the 45(3) election.

senasena wrote: ↑ That's not how it works.

You will trigger capital gains when there is a change of use, it's called deemed disposition, basically the tax is due now unless you elect and meet the requirements of the 45(3) election.

That's what I meant, I meet the reqirements for 45(3) to defer 5 years of capital gains until I dispose of the property once more. So when I dispose of it 30 years down the road at 500k, how does that affect my capital gains payment.

chevyz07 wrote: ↑ That's what I meant, I meet the reqirements for 45(3) to defer 5 years of capital gains until I dispose of the property once more. So when I dispose of it 30 years down the road at 500k, how does that affect my capital gains payment.

You are conflating two different points. An important question: did you have another residence that was declared your primary residence while you were were renting out this house? If not, you are allowed to designate this house as your primary residence for the 4 years prior to converting it to your primary. In your case, it would have been your primary for the entire time you owned the house, and you don't need to pay capital gains tax.

If you DID have another primary residence in that period, then you can't designate this residence as your primary for the prior 4 years. In this case, you do have a capital gain of $300K; you can defer the payment of the capital gains to a future time 45(3) (usually when you sell, but CRA could request sooner). It's irrelevant what the value is of the home when you sell; you still owe capital gains on this amount.

If you elect 45(3) there will be no capital gains tax to pay, the property will be declared as your principal residence for all the years you owned it.

FYI it's not possible to know what you meant if you don't write it, I see you have edited your post after my response.

stanimal wrote: ↑ You are conflating two different points. An important question: did you have another residence that was declared your primary residence while you were were renting out this house? If not, you are allowed to designate this house as your primary residence for the 4 years prior to converting it to your primary. In your case, it would have been your primary for the entire time you owned the house, and you don't need to pay capital gains tax.

If you DID have another primary residence in that period, then you can't designate this residence as your primary for the prior 4 years. In this case, you do have a capital gain of $300K; you can defer the payment of the capital gains to a future time 45(3) (usually when you sell, but CRA could request sooner). It's irrelevant what the value is of the home when you sell; you still owe capital gains on this amount.

I do not have another residence while I was renting it out for 4 years, I did not know that. I read the T4037E and didn't see it. Where can I find this on the CRA website?

senasena wrote: ↑ If you elect 45(3) there will be no capital gains tax to pay, the property will be declared as your principal residence for all the years you owned it.

FYI it's not possible to know what you meant if you don't write it, I see you have edited your post after my response.

You just didn't read it properly. This was my original post below:

So I bought my house in 2019 for 600k, and rented it out for 3.5 years, now its worth $900k in 2022. I'm moving into the house so it will be my principal residence, and I am deferring capital gains until I sell.

If I sell it in 2052 (30 years) and the house price crashes to 500K, do I still pay 900k-600k = 300k capital gains, or is it zeroed out?

EDIT: Also is capital gains split between the 30 years, e.g. I disposed it to principal in 2022, then sold it in 2052, so 300k split between 30 years?

chevyz07 wrote: ↑ I do not have another residence while I was renting it out for 4 years, I did not know that. I read the T4037E and didn't see it. Where can I find this on the CRA website?

Read this, specifically the "Complete change in use of a property from income-producing to principal residence" section

https://www.canada.ca/en/revenue-agency ... html#toc19

chevyz07 wrote: ↑ You just didn't read it properly. This was my original post below:

You are welcome.

Normally people would show a bit of an appreciation for the strangers offering help and answering questions, you serve attitude.

senasena wrote: ↑ You are welcome.

Normally people would show a bit of an appreciation for the strangers offering help and answering questions, you serve attitude.

Just to you, no-one else.

stanimal wrote: ↑ Read this, specifically the "Complete change in use of a property from income-producing to principal residence" section

https://www.canada.ca/en/revenue-agency ... html#toc19

Interesting, thank you. I did not see this before, I'm going to have to research this more to ensure I understand it right.

This sounds easy but it is not.

I have done this before and the accountant charged quite a bit extra to file the election.

Better consult your accountant before doing it.