My question is: Canadian-specific
QUESTION: I purchased a pre-sale condo in downtown Vancouver back in October
2003. It was completed April 2006 and I lived in it for 1 1/2 months until I
was married and decided to rent it out. Me and wife purchased another home
with my father-in-law in May 2006 because she didn't want to live downtown
and we now live there. The condo is currently rented out. The condo was my
principal residence until July 2006 when we were married. Will I have to pay
capital gains the condo if I were to sell it right now?
---------------------------------------------------------------------------
david ingram replies:
living in it for 1 1/2 months does not make it a personal residence if you
bought it to flip or to rent in the first place.
However, if you bought it before you met your present wife and then met and
married a woman who did not want to live there because it was: too small;
she did not like the area; she was pregnant and wanted to live near or
mother to baby sit or any other rational reason, then the property would be
your principal residence and any increase in value form your purchase price
to the day you bought the next house would be/should be tax free.
After that, you have a choice because you have the option of claiming the
old condo or the new place tax free for the period of time from when you
bought the new place to the day you sell the old one.
Form T2091 is what you need to fill out.
This older Q & A might help.
----------------------
My daughter is closing on a presale Yaletown condominium this summer. She
is working until Christmas in Alberta. She returns to Vancouver from Jan to
May and if the job becomes a full time position, then she may return to
Alberta to live. At the time of presale, February 2004, we thought that the
suite would be assigned to her and that she would live in the suite.
I was hoping that she could declare the suite as her permanent residence
since she is only renting in Alberta and the work is not permanent. In
May 2007, she could decide to keep or sell the suite.
What does she need to do in order to qualify the suite as her permanent
residence?
-----------------------------------------
david ingram replies:
There is no absolute answer because you can call a toad a frog all day long
but it is still a toad.
To be a principal residence and tax free for income tax purposes, the
property must have been bought by her to live in and she HAS TO move into
it. - No exceptions that I know of.
You can expect that the CRA will be looking at "every" quick resale in EVERY
downtown building.
In deciding if it is a capital gain or a flip, the CRA will be looking at
the suitability of the unit as a residence, the ability to pay for the unit
and past and even future performance.
In other words if she claimed this one as a principal residence and then did
it again a year later, the CRA would have every right to go back and
reclassify the first one.
--------------------------
QUESTION: My mother owns a condo unit in BC. The title on the mortgage
includes her, myself( daughter) and granddaughter. All expenses eg mortgage,
utilities etc are paid from her accounts. AS she has now been placed in a
senior's home the property is rented. Can we still claim the additional tax
grant on her behalf ( she is 94 years) whilst the condo is being rented. I
heard that there was a 4 year "grace" period??
---------------------------
david ingram replies:
The answer is NO. Mother has to live in the property.
The 4 year exemption applies to capital gains tax. If you make an election
under section 45(2) to continue to claim the house as a personal residence
even though she does not live in it, you get to claim those years on form
T2091 (designation of a personal residence) when it is sold.
The following prior question and answer will help.
======================================
From: taxman at centa.com [mailto:taxman at centa.com]
Sent: Saturday, April 22, 2006 7:23 PM
Subject: Section 45(2) claiming a rental former home tax free - form
T2091 - international non-resident cross border income tax help
assistance expert preparation & immigration consultant david ingram,
experts on rentals mutual funds RRSP RESP IRA 401(K) & divorce
My question is: Canadian-specific
QUESTION: My partner owns a condo in Port Moody, British Columbia which she
bought as her principle residence. She moved into the suite in November,
2004 and moved out in June, 2005. She left the property so we could be
together, and moved to Prince George to live with me. We have rented a home
in Prince George since we have been living together. The property is
currently being rented, but she is considering selling it. Since she did not
leave her property for profit, but for unforseen circumstances, is she
subject to capital gains tax?
---------------------------------------------------------------------------
david ingram replies:
She has to elect to declare it her principal residence even if she did not
live in it.
With her 2005 tax return, she has to report the income and expenses for the
rental on schedule T776.
She should also attach a declaration that states:
I hereby elect under section 45(2) of the Canadian Income Tax Act to declare
the residence at _________________________________________
__________________________________________
_____________________________________________
to be my principal residence even though I do not ordinarily inhabit it.
This declaration is good for 4 years with a voluntary decision to rent out.
If the decision to rent is necessary because of a job transfer, the election
is valid for the duration of the job transfer.
When sold later the taxable portion (if any) is calculated by filling in
form T2091.
=======================
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