Capital gain or tax free Principle residence

My_question_is: Canadian-specific
Subject: Capital gain/Principle residence
Expert: taxman@centa.com
Date: Sunday March 18, 2007
Time: 02:03 AM -0500

QUESTION:

Hi,
I had purchased a house in jan 2006 for my personal residence and started doing some repairs before we could move in the property but in the meantime my wife lost her job and therefore made extermly dificult for us to hold the house based on my income alone.

We sold the house in April,2006 for a gain,since property prices had gone up by then.
My question is
1.Can i claim principle residence exemption on this house since this was only proprty we owned in this year,no other proprty owned by both of us(husband and wife)

2.If not,what will be the taxes on a capital gain of 70000?

Best regards

_______________________________________________________
david ingram replies:

If you did not move into it but can prove that you intended to, it is subject to capital gains tax on 1/2 of the profit. If you had something like a builder's mortgage on it, the CRA will not believe you and want to tax you on all of the profit.

If you did not move in, it can NOT be a tax free principal residence because you did not ordinarily inhabit it.

The 70,000 is cut in half and only $35,000 is taxed if it is in both names. Then you would presumably cut the $35,000 in half and you would report $17,500 and your wife would report $17,500. The tax at that point would range from 23% if your wife's income was less than $35,000 for the year to over 43% if your other income was over $120,000

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