principal residence - house or cottage or ski chalet.-

How long after a sale do I have to declare a house to be the principal
residence? I am selling my house later this year and will be selling my
cottage in  several years. I know fairly precisely how much I will be able
to sell my house for but not so for the cottage as it may go up or down
quite significantly in 3 years.
>From a capital gains perspective I would like to delay making the
declaration until after I sell the cottage.
Many thanks.
---------------------------------
david ingram replies:
If you sold it on Dec 20th, you would be claiming it as your principal
residence (CRA form T2091) on your 2005 return in April.
>From the moment you sell, any future gains in the cottage will be tax free
assuming you do not buy another house right away.
Looking at form T2091 will show you that you will then owe tax on any gain
from the day you bought the cottage until the day you sold the house.  This
assumes that you already had a house or a different house as a principal
residence at the time you bought the cottage.
Another possibility is that your waterfront Saltspring Island cottage has
gone up more in value than your 3 bedroom townhouse in Chilliwack.
If that is the case, you would elect to pay tax NOW on the sale of the
townhouse and claim the cottage as your tax free home.
You likely need to sit down with someone like us to get it straight.  You
are talking about thousands of dollars in tax.
And your case is not unusual at all.  I just finished helping someone decide
whether the waterfront cottage, the Vancouver house or the Whistler ski
chalet made the most sense (and thousands of dollars) to be the principal
residence for tax purposes.  This one was further complicated because they
were moving back to the USA and subject to US tax on any Canadian profit on
their house over about $600,000 and all three were close to that profit.
I would charge a minimum of $428 for that consultation in person or by
phone.
david
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