Sent: Wednesday, May 03, 2006 5:44 PM To: taxman at centa.com Subject: Principal residence in BC but does most of our business in AB We have businesses and houses in the provinces of Alberta (1) and BC (4). Since it is in BC where we started, we had declared the BC house as our primary residence. This year, however, we decided to switch and declare Alberta as our primary in view of our anticipated move of selling that house (perhaps, within, say, 6 months). We think the Alberta business justifies our having to declare our house there as a primary residence and notwithstanding that we still use the BC house, it is our belief that for so long as you declare only one residence at a time (i.e. avail of the grant, etc.), subsequent sale of it will not result into capital gains tax. Is this a very safe stand to have? We are not sure! Considering that the capital gains of the house are expected to be in 7 digits, our fear multiplies and begin to have doubts! Also, currently, we get 95% of our income from the BC businesses and still live on our BC house. Our youngest son studies in BC and can not be relocated. What could be the best moves? _________________________________________________________________ david ingram replies: You misunderstand the situation. You can only have one principal residence at any one time and the gain is calculated by a formula where you declare specific years of ownership to be your principal residence. Therefore if you declare house A (for Alberta) to be your principal residence for the years 1998 to 2006, when it comes time to declare house B (for BC for instance) you have already used the years 1998 to 2006 and House B becomes taxable for those years. You can find the relative form T2091 which needs to be filled out when you have more than one house at http://www.cra-arc.gc.ca/E/pbg/tf/t2091_ind/t2091_ind-03e.pdf The worksheet is at: http://www.cra-arc.gc.ca/E/pbg/tf/t2091_ind_-ws/t2091_ind_ws-03e.pdf Declaring yourself a resident of Alberta when you really live in BC would be a criminal offence if they decided to prosecute. However, to be fair, I have never seen a criminal prosecution for this. I have seen numerous people penalized and interestized (new word) when BC catches up though. Before you do anything, you should likely consult with me or someone like me who really understands the situation. If the Alberta property has increased over a $1,000,000 and the BC property is only up $400,000, it makes all the sense in the world to declare that house your tax free residence. It just means that you WILL have to pay tax on the BC house for that period of time. The same situation would apply if you had a house in town and a spectacular condo at Whistler. You would declare Whistler tax free and pay tax on the house in Vancouver town. ------------------- David Ingram's US / Canada Services US / Canada / Mexico tax, Immigration and working Visa Specialists US / Canada Real Estate Specialists My Home office is at: 4466 Prospect Road North Vancouver, BC, CANADA, V7N 3L7 Cell (604) 657-8451 - (604) 980-0321 Fax (604) 980-0325 Calls welcomed from 10 AM to 10 PM 7 days a week Vancouver (LA) time - (please do not fax or phone outside of those hours as this is a home office) email to taxman at centa.com <mailto:taxman at centa.com> www.centa.com <http://www.centa.com/> www.david-ingram.com <http://www.david-ingram.com/> Disclaimer: This question has been answered without detailed information or consultation and is to be regarded only as general comment. Nothing in this message is or should be construed as advice in any particular circumstances. 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