>> Last year,
we rented out our condo in Vancouver. The
>> plan then was to
have the rent cover our mortgage
>> payments for the 12 months that we
would be away. A
>> short term solution.
Now, we are planning to be away from BC for a longer
>> period of time
(approx. 2 years) and wish to sell the condo
>> in the middle of the
year, as we are unable to rent the
>> condo for any longer due to
strata council by laws.
>> 1) If we sell the condo when
there has been a tenant living
>> in it for 12 months, will we pay
>> 2) What are our best options to avoid
paying this tax?
>> 3) If capital gains would be owed, for
how long would we
>> have to make the unit our principal residence
>> we can sell it and not pay CGT?
If you filed a section 45(2) election with your
first year's rental, you
can rent the condo out for up to 4 years (plus
1 in the calculation)
without incurring capital gains tax if you have
not bought another
residence that you are lioving in.
My question is: Canadian-specific
QUESTION: Dear Mr. Ingram,
bought a house in the December of year 2000, lived there till the end of
December 2000 (3 weeks) and started to rent it out on January 1, 2001. I filed
the election 45(2) to claim the house as my primary residence for years 2001,
2002, 2003 and will do it for 2004.
I do not claim a depreciation for those
I want to sell the house now. Do I need to move in house first in
order to avoid the payment of the capital gain taxes. For how long I have to
stay there to be eligible for not paying the capital gain taxes on sold house if
I need to move in.
Thank you in advance for you
david ingram replies:
First I am going to repeat your old
question from last July and my answer.
My question is: Canadian-specific
QUESTION: Hi, David!
like to know is it possible to use the election under the section 45(2) again if
the old house is sold and the new one is bought. Can it be used unlimited number
of times by the condition that it is used for each house only once.
---------------------------------------------------------------------------David Ingram replies:
Section 45(2) is intended to allow
people to try something out. This means that if you move to a rented condo
for a couple of years and rent your house out, you can move back into the house
without suffering a capital gains tax under section
Since it was passed on June 17,
1972, (32 years ago now) I have never seen it used more than twice by one
Does not mean it has not been used
more than twice in thirty years, it just means it is
There is no numeric restriction but
if you are moving in and out of houses, the CRA will treat you as a trader and
tax you at full rates.
Now, to answer this question.
Section 45(2) is NOT something you can plan to use. In other words, your
living in the house for three weeks and renting it out and filing a section
45(2) election does NOT make it tax free if you bought the house to rent and not
to live in as your personal principal residence.
Your question indicates to me that
you are trying to beat the system and did not buy the first house to live in and
unless you can show the tax office that you moved every stick of furniture in
and really intended to live there, the CRA will not allow it to be sold tax
This year, a new policy of the CRA
is that they wish form T2091 to be filed with every tax return where a personal
house was sold during the year.
If it was your residence and you
genuinely intended to live there and were transferred of suddenly got married or
could not stand your neighbour or lost your driver's licence or suffered
some other disaster that caused you to "HAVE TO" move suddenly, filing section
45(2) will make it tax free provided you did not also own another house that you
did live in. If you did own another house that you actually
lived in, claiming the house you have filed the 45(2) election for as tax free,
will MAKE THE HOUSE YOU ACTUALLY LIVED IN TAXABLE.
If you have a genuine 45(2)
election, you do not need to move back in. If it is not a genuine 45(2),
moving back in will TRIGGER a tax bill as you move
You need a consultation with someone
who knows the rules before you make a mistake. I am available in person or by
phone at a fee of $350.00 minimum for an hour but not until November
As many know, I charge this for US /
Canada tax an immigration advice as well. I am not alone
I have sent two out of town people
to him in the last month where it was obvious to me tha tthe people needed a
lawyer as opposed to a consultant..
If you want a free answer for a
couple of minutes, remember
Answers to this and other
similar questions can be obtained free on Air every Sunday
Every Sunday at 9:00 AM on 600AM in
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