Need tax help on Principle Residence Status.

BiegeToyota wrote: ↑ From 2016 it wasn't your principal residence regardless if you own only 1 property.

Yes I agree. I am being told I can claim it for 4 years as my principal residence?
I just don’t want a big tax surprise

You didn't live in the property, so it is not your principal residence... therefore, you cannot claim the exemption. You'd have to pay cap gain taxes on this.

Edit: if you want the CRA definition here you go: "According to the Canada Revenue Agency (CRA), a “principal residence” is any residence ordinarily inhabited by you or a family member in the year."

This is exactly the opposite of what was said. It WASN’T your principle residence therefor you can NOT claim it as so.

ontariobrent wrote: ↑ Yes I agree. I am being told I can claim it for 4 years as my principal residence?
I just don’t want a big tax surprise

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

Have a look at section 2.54 to 2.56 in this link regarding subsection 45(3) election which can be filed at the time of selling the property. There is an example case there as well which is somewhat similar to yours.

“Similar to the treatment for a subsection 45(2) election (see ¶2.50 to 2.51), a property can qualify as a taxpayer’s principal residence for up to four tax years prior to a change in use covered by a subsection 45(3) election, in lieu of fulfilling the ordinarily inhabited rule (discussed in ¶2.10 to 2.12) for these years.”

You cannot have had another principal residence during this period and you cannot have claimed any Capital Cost Allowance (CCA) on the property.

I am not a tax professional so you should consult a tax professional for further advice. Hope this helps.

Edited post: I believe this would only apply if you lived for a period of time after changing from income producing to principal residence.

Trituris wrote: ↑ 
Most of the replies above have not read the relevant information published by the CRA.

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

Have a look at section 2.54 to 2.56 in this link regarding subsection 45(3) election which can be filed at the time of selling the property. There is an example case there as well which is somewhat similar to yours.

“Similar to the treatment for a subsection 45(2) election (see ¶2.50 to 2.51), a property can qualify as a taxpayer’s principal residence for up to four tax years prior to a change in use covered by a subsection 45(3) election, in lieu of fulfilling the ordinarily inhabited rule (discussed in ¶2.10 to 2.12) for these years.”

You cannot have had another principal residence during this period and you cannot have claimed any Capital Cost Allowance (CCA) on the property.

I am not a tax professional so you should consult a tax professional for further advice. Hope this helps.

That section only applies if you make the election before you move out, and you are moving back in.

OP is selling the place so it's irrelevant

KanataKG wrote: ↑ That section only applies if you make the election before you move out, and you are moving back in.

OP is selling the place so it's irrelevant

Subsection 45(2) election and 45(3) are different elections and I think people are mixing them up. Subsection 45(2) election is filed before moving out and applies to the 4 years after the election is declared. Subsection 45(3) election is filed at the time of selling and applies to the 4 years prior to moving back in.

“The taxpayer may instead defer recognition of the gain to a later year by electing under subsection 45(3) that the above-mentioned deemed disposition and reacquisition under paragraph 45(1)(a) does not apply. This election is made by means of a letter to that effect signed by the taxpayer and filed with the income tax return for the year in which the property is ultimately disposed of (or earlier if a formal demand for the election is issued by the CRA)“

Trituris wrote: ↑ 
Most of the replies above have not read the relevant information published by the CRA.

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

Have a look at section 2.54 to 2.56 in this link regarding subsection 45(3) election which can be filed at the time of selling the property. There is an example case there as well which is somewhat similar to yours.

“Similar to the treatment for a subsection 45(2) election (see ¶2.50 to 2.51), a property can qualify as a taxpayer’s principal residence for up to four tax years prior to a change in use covered by a subsection 45(3) election, in lieu of fulfilling the ordinarily inhabited rule (discussed in ¶2.10 to 2.12) for these years.”

You cannot have had another principal residence during this period and you cannot have claimed any Capital Cost Allowance (CCA) on the property.

I am not a tax professional so you should consult a tax professional for further advice. Hope this helps.

As an accountant I can tell you this section cannot be applied... he has never lived in the house, it has been a rental property since the moment he purchase it, he most certainly cannot claim the principal residence exemption and has been a full income producing property during the lifetime of his ownership of the property.

freeman93 wrote: ↑ As an accountant I can tell you this section cannot be applied... he has never lived in the house, it has been a rental property since the moment he purchase it, he most certainly cannot claim the principal residence exemption and has been a full income producing property during the lifetime of his ownership of the property.

I should have added that I was assuming he would live in the property for a period of time prior to selling. If that occurred, it would match the example given by the CRA, is that correct? But I agree, if he never lived in the house at all, this would not count. I missed pointing that out.

Trituris wrote: ↑ I should have added that I was assuming he would live in the property for a period of time prior to selling. If that occurred, it would match the example given by the CRA, is that correct? But I agree, if he never lived in the house at all, this would not count. I missed pointing that out.

Yes, if he moves into the property you are right, and never claimed CCA.. they could claim this exemption. However, IMO they would get challenged by the CRA on this and they would have to prove principal residency. Therefore, they would have to actually move in there and live there for a good while. Change their driver's license, change over utilities, mailing addresses... it's not as simple as just claiming it as a principal residence, especially as they have had it as an income-producing property for this long.

I'd say he is safer just paying the capital gains tax here.

Edit: just to add, these are cases that CRA challenges often... so it's not just the luck of the draw on getting audited here.

ontariobrent wrote: ↑ Looking at selling a house. Bought july 2016. Was bought for myself to live in. My work transfer didn’t happen so I rented it out in sept 2016- current.
I have no other principle residence.
Do I pay capital gains on the sale or can I still claim principle residence exception?
I have researched and been told both answers.
Thanks

What happened between July 2016 and September 2016? Did you live in the house? If not, then it was not your principal residence. The s45 election would not apply as there was no change in use (i.e. from principal residence to rental).