Capital gain exemption on principle residence - Ask an

Dear Sir,
I heard about that there is a capital gain examption on the principle
resident. Is that the full amount can be exampted or the examption only to
certain amount?
david ingram replies:
If you only own one house and live in that house, there is no limit on the
profit from the sale of the principle or personal residence.
This assumes that you bought the house to live in as a residence and not to
flip and are trying to make it "look" like your reason for buying it was to
live in it for a long time.
The following older question will give you an idea of the timing.
I just moved into my new condo at XXXXX two weeks ago, my agent is already
after me with a price  I can hardly refuse. Couple of questions about tax
implications. How long do we have to live in a place to qualify for capital
gains tax exemption as principal residence. I also read in an income tax
self help guide book that in Canada we can sell our principal residence once
a year capital gains tax exempt, is this correct?
david ingram answers:
There is no absolute answer.  Each one is based upon the individual facts
but let me try.
One: The buying and selling of a house by itself is a venture in the nature
of trade and subject to tax at ordinary tax rates.  Therefore, if "anyone"
buys a house and puts it up for sale when they buy it or fixes it up and
sells it, the profit is taxable at ordinary tax rates.  i.e. a $20,000
profit would be taxed at the same rate as interest, rents or wages.
Two:    If the house was bought to rent out and one rented it out for ten
years or twenty years and then sold it for any reason at all, the profit
would be considered a capital gain and only 50% would be taxable at normal
Three:    But if one bought a house to sell and that was demonstrated by the
fact that it was listed soon after purchase and then rented out (because the
market dropped) for ten or fifteen years, the CCRA would likely try and tax
any profit on the sale as straight income because the "intention" was to
flip it which is a straight business income.
Four if one bought a house to live in it and did so for twenty years, it
would be a tax free principal residence "UNLESS" there was a summer cabin or
a Whistler ski cabin which they claimed as their tax free residence for the
same period.  In that case, the cabin is tax free and the house they lived
in is taxed at capital gains rates.
Five:    If one bought a little house and lived in it for five years and
then bought another house because they had twins and needed a larger house,
the sale of the first one would be tax free and in my opinion if life's
circumstances changed every five years and a family moved every five years
because of a life change, each house would be tax free.
Six:    However, if one bought a "fixer upper" and lived in it for four
years and sold it and bought another fixer upper and sold it four or five
years later and then bought another one, etc., the CCRA would likely try and
tax the second and third house if the CCRA became aware of the
carpentry/renovations part of the sales. Four or five years apart would
likely escape the attention of the CCRA but two or three years would likely
get their attention.
Seven:    If one bought their dream house and were transferred to another
city two weeks after they moved in, the sale would be a tax free principal
residence sale.
Eight:    If one bought a house and someone offered an "unreal profit" two
weeks later and they sold, the CCRA would likely want to tax the profit as a
straight income.  The reason is simple. You might think that because it was
an unsolicited offer it is not taxable but that is not the case.  There was
no reason to sell other than a profit.  That fact alone can make it a
venture in the nature of trade.
Nine:    However, if one bought a house or condo and five days after moving
in found out they were pregnant and would need a bigger condo or the
penthouse in the same building became available, or they could not stand
their neighbour or there was a smell from a pulp mill or their wife was
unexpectedly" afraid to walk down the street because of muggers, prostitutes
or drug dealers or because she was propositioned by "johns"  every time she
went out the door, putting the place up for sale two weeks after moving in
and actively soliciting a buyer would likely still leave a tax free
principal residence sale.
Another rule of thumb.  If the land registry show three buys and sells in a
one year period, it has been my experience that the person can expect to
have their return scrutinized to see what is been reported. So if you sell
your house in May, 2003, buy another in May and sell in June and buy another
in July, the CCRA is very likely to take a look.
And, I believe that the answer to the question above is that the CCRA would
tax the sale if they spotted it.
If the subject building has had several people buy a condo and flip it (I do
not recognize the building's name), then this person is likely to get caught
by the CCRA looking at the whole building for flippers.
Log on to, click on tax guide and then on the capital gain
section to read a bunch of actual tax cases where a lot of people paid
straight income tax on items they wanted to claim tax free.
A direct link would be to
Last but not least, any self-help book that says you can sell a principal
residence every year should be taken off the shelves immediately.
Hope this helps
Answers to this and other similar  questions can be obtained free on Air
every Sunday morning.
Every Sunday at 9:00 AM on 600AM in Vancouver, Fred Snyder of Cartier
Partners and I will be hosting an INFOMERCIAL but LIVE talk show called "ITS
Those outside of the Lower Mainland will be able to listen on the internet
Local phone calls to (604) 280-0600 - Long distance calls to 1-866-778-0600.
Old shows are archived at the site.
This from ask an income tax immigration planning and bankruptcy expert
consultant guru or preparer  from or or Canadian David Ingram deals daily with tax returns
dealing with expatriate:
multi jurisdictional cross and trans border expatriate gambling refunds for
the United States, Canada Mexico Great Britain the United Kingdom, Kuwait,
Dubai, Saudi Arabia, South Africa,  Thailand, Indonesia, Egypt, Antarctica,
Japan, China, New Zealand, France, Germany, Spain, Italy, Russia, Georgia,
Brazil, Peru, Ecuador, Bolivia, Scotland, Ireland, Hawaii, Florida, Montana,
Morocco, Israel, Iraq, Iran, India, Pakistan, Afghanistan, Mali, Bangkok,
Greenland, Iceland, Cuba, Bahamas, Bermuda, Barbados, St Vincent, Grenada,,
Virgin Islands, US, UK, GB, American and Canadian and Mexican and any of the
43 states with state tax returns, etc.
income tax wizard wizzard guru advisor advisors experts  specialist
specialists  consultants taxmen taxman tax woman planner planning
preparer of Alaska,  Alabama,  Arkansas,  Arizona,
 California Denver  Colorado, Connecticut,
Delaware District of Columbia Miami  Florida,
Garland Georgia,  Honolulu Hawaii,  Idaho,  Illinois,
 Indiana Des Moines Iowa  Kansas  Kentucky,
 Louisiana  Bangor Maine  Maryland  Boston, Massachusetts, Michigan,
Mississippi,  Missouri,  Montana,  Nebraska,
Nevada, New Hampshire,  New Jersey,
New Mexico, New York, North Carolina,
North Dakota,  Ohio,  Oklahoma,  Oregon.
Paris,  Rome, Sydney, Australia Hilton
Pennsylvania,  Rhode Island,  Rockwall,
South Carolina, South Dakota, Tennessee,
Texas,  Utah, Vermont,  Virginia,
West Virginia, Wisconsin, Wyoming,
British Columbia, Alberta, Saskatchewan,
Manitoba, Ontario, Quebec City,
New Brunswick, Prince Edward Island,
Nova Scotia, Newfoundland, Yukon and
Northwest and Nunavit Territories,
Mount Vernon, Eumenclaw, Coos Bay
and Dallas Houston Rockwall Garland
Texas  Taxman and Tax Guru  and wizzard
wizard -
 David Ingram's US/Canada Services
US/Canada/Mexico Tax Immigration & working Visa Specialists
US / Canada Real Estate Specialists
4466 Prospect Road (Personal residence by appointment only please)
North Vancouver,  BC, CANADA, V7N 3L7
Calls accepted from 10 AM to 10 PM 7 days a week
Res (604) 980-3578 Cell (604) 657-8451
Bus (604) 980-0321 Fax (604) 980- 0325
davidingram at
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 & the author and any and all
non-contractual duties are expressly denied. All readers should obtain
formal advice from a competent financial, or real estate planner or advisor
& appropriately qualified legal practitioner, tax or immigration specialist
in connection with personal or business affairs such as at
Outgoing mail is certified Virus Free.
Checked by AVG anti-virus system (
Version: 6.0.797 / Virus Database: 541 - Release Date: 11/15/04
Outgoing mail is certified Virus Free.
Checked by AVG anti-virus system (
Version: 6.0.797 / Virus Database: 541 - Release Date: 11/15/04

Comments (0)

CEN-TA Cross Border Services - Tax, Visas, Immigration