Real Estate

What happens when your principal residence becomes your secondary?

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  • Apr 13th, 2016 11:31 pm
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[OP]
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Jan 27, 2004
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What happens when your principal residence becomes your secondary?

What happens when your principal residence, becomes your secondary?

Example.

You buy a condo. You outgrow it and decide to leave after 5 years...
You decide to keep the condo and rent it out as an income property.

You obtain a detached home for yourself... This is now your principal residence.


What happens when you sell that condo in re: to taxes?
4 replies
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Jun 24, 2002
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BC
UrbanPoet wrote: What happens when your principal residence, becomes your secondary?

Example.

You buy a condo. You outgrow it and decide to leave after 5 years...
You decide to keep the condo and rent it out as an income property.

You obtain a detached home for yourself... This is now your principal residence.


What happens when you sell that condo in re: to taxes?
It is taxed as a capital gain when you sell it and the profit is pro-rated by number of years you owned it under the number of years you rented it.
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Jul 16, 2002
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Vancouver
A solid way to determine this stuff is to do an appraisal (around $250 give or take) whenever the use case of piece of property changes. So in this case, get an appraisal done when you move out and it becomes a rental. If you ever decide to move back in yourself and it becomes a primary residence again, do another appraisal. This way you can do a proper assessment of the difference between the appraisals and the sale price when you sell it.
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UrbanPoet wrote: What happens when your principal residence, becomes your secondary?

Example.

You buy a condo. You outgrow it and decide to leave after 5 years...
You decide to keep the condo and rent it out as an income property.

You obtain a detached home for yourself... This is now your principal residence.


What happens when you sell that condo in re: to taxes?
As Puff suggested, do an appraisal when you move out of the condo. The fair value of the condo at that date minus the cost will always be sheltered from tax. You'll then have a new cost basis for the condo (ie: the fair value) and you'll pay tax on any gains from that new reference point. It's not quite a proration of the gain by the number of years owned versus rented. For example, the condo may not appreciate another cent from when you were deemed to dispose it by switching, and in that case you'd have no tax liability.

Have a look at http://www.cra-arc.gc.ca/tx/tchncl/ncmt ... 2-eng.html for further details.
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Dec 1, 2015
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Great info, and thanks for the link!
ahlaker wrote: As Puff suggested, do an appraisal when you move out of the condo. The fair value of the condo at that date minus the cost will always be sheltered from tax. You'll then have a new cost basis for the condo (ie: the fair value) and you'll pay tax on any gains from that new reference point. It's not quite a proration of the gain by the number of years owned versus rented. For example, the condo may not appreciate another cent from when you were deemed to dispose it by switching, and in that case you'd have no tax liability.

Have a look at http://www.cra-arc.gc.ca/tx/tchncl/ncmt ... 2-eng.html for further details.
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