Were living in a house which caught fire is it a

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This question comes from: 
 http://www2.jurock.com/askexpert/ask.asp?aid=121&cid=63
My question is: Canadian-specific
QUESTION: We purchased a home and lived in it for a few months.  During the renovation we had a fire and have ended up replacing most of the house.
We are planning to sell it when it is finished.  During the construction we have been renting and do not own another property.
We believe that it still qualifies as our principle residence but were wondering if there are any poatential problems.
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david ingram replies:
Why are you selling it instead of moving back into your home when it is fixed?.
If the answer is that you were just living in it while you were fixing it up to sell,  any profit is taxable at full rates because you are in the business of buying renovating houses.
Living in the house does NOT make it a tax free pricipal residence unless you bought it to live in for a long time.
A "long time" is not defined in the act but policy would seem to be an average of five years at least.
If you did buy it and were renovating it for your personal use, then the house would be tax free but you would still be subject to being asked (as I have) why you are selling your newly remodelled home. 
If you are selling it because your wife has decided that she does not like the area, the schools, the commute, or any of another dozen reasons, then it could be tax free. 
However if you are renting in the same area and stay inthe same area without moving away now, schools, area, commute, air quality, etc., are not going to be a reason for selling.
Another reason for selling could be that you have lost a job and can't afford it any more.
You can find out a lot more about capital gains versus straight income or tax free principal residence by reading some of the tax cases at www.centa.com click on tax guide and then click on the 127 capital gains section. I wrote this 13 years ago but the concepts are still there.
Hope this helps and of course, our office specializes in real estate taxation because it shares space with CEN-TA REALTY.
David Ingram of the CEN-TA Group
Real Estate Tax Specialists, AND
US / Canada / Mexico tax and working Visa Specialists
108-100 Park Royal South
West Vancouver, BC, CANADA, V7T 1A2
(604) 913-9133 - Fax 913-9123 [email protected]
www.centa.com www.david-ingram.com
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