Another Personal Residence exemption from Saskatoon or

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I read a lot about this but still can't find the answer I am looking for.
I own a townhouse (mortgaged)
I live in the townhouse and have roommate pay me rent
I get $12,000/year in rent 
Mortgage of $150,000
Can I deduct interest payments and property tax against the rent and still qualify for the principle residence expemtion when I sell my home?
I live in Canada
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david ingram replies:
I presume you are in Saskatoon or Regina. I used to live in both cities and had coffeee houses there (pre STARBUCKS).
The answer is yes.  You are renting out a room or two and have not made any structural changes to the building I presume.  
File your return and report the rental income and expenses on Schedule T776.
Do NOT claim depreciation (Canada calls it CCA for Capital Cost Allowance)
The act says that you can claim a house and one/half hectare capital gains tax free.  
Even though Bulletin IT120-R6 see it at http://www.ccra-adrc.gc.ca/E/pub/tp/it120r6/it120r6-e.pdf
implies that a duplex or a house with structural changes will be taxable the judges have ruled against the bulletin (which has been changed 6 times) as in the following case which comes out of www.centa.com - click on [Tax Guide] click on [Capital Gains].  
In 1986, Fedel Saccomanno won the sale of his home as a tax free capital gain as his principal residence. He had bought a triplex with two units rented out, and lived in the third unit with his wife on weekends when he was not teaching at the University of Waterloo. When he did not get tenure at Waterloo, and sold the property, DNR tried to tax two-thirds of the profits. Judge Taylor ruled that the entire triplex was tax free, giving credence to my claim in my Investment Guide. In the Investment Guide, I suggest that people with duplexes and triplexes should claim the whole building tax free in spite of the fact that Bulletins IT 120R2 and R3 stated that half a duplex and two thirds of a triplex would be taxable. 
  Hope this helps:
david ingram
David Ingram of the CEN-TA REALTY  Group
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
108-100 Park Royal South
West Vancouver, BC, CANADA, V7T 1A2
(604) 980-0321 - Fax 913-9123 [email protected]
www.centa.com 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. No contract exists between the reader and the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent and appropriately qualified legal practitioner or tax specialist in connection with personal or business affairs such as at www.centa.com. If you forward this message, this disclaimer must be included."
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david ingram
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