Principal Residence changed to Investment Property

[Bikram1738]

Hello, I've owned a townhome since 2016. I lived in it until Oct 2020, when I rented it out and moved in with my parents. I understand that I need to get a my Property appraised so that I can shelter from Capital Gains Tax, the increase in my property value from when I bought it in 2016 to when I rented it out in Oct 2020.

What steps do I have to take in Ufile to reflect my situation?

 

Thanks.

[Nawal]

Hi Bikram1738, You are considered to have disposed the property at the time of the change in use for proceeds equal to its market value (FMV), and to have reacquired the property immediately thereafter at a cost equal to its market value. So it result in a capital gain you must report but with an exemption and a rental income . Then you have to report your rental income for 2020.

To report the sale of your principal residence, please follow the steps below:

1. On the "Left-side menu on the Interview tab", select the "CRA Questions" topic.

2. On the page that appears, go to the line "Did you sell a principal residence in 2020?". The sale of a principal residence must now be reported with any principal residence designation.

3. If you answer "Yes", a topic will be generated in the "Left-side menu on the Interview tab" with the heading "Capital gains (or losses) & ABIL".

4. On the page appearing to your right, click on the plus sign "+" icon to the right of the line "Personal use property (Including the principal residence)".

5. On the page that appears, enters the relevant information in the first fields. If you are a co-owner of the residence with your spouse, go to the line "Your percentage share of capital gain/loss recorded here" enter your percentage.

6.The following line will be generated "Do you wish to transfer the remainder to your spouse's tax return (if applicable)?".

7. If you answer "Yes" you do not need to answer the CRA's question "Did you sell a principal residence" in your spouse's file because the program will transfer the information into their file.

8. Then go to the "Principal residence" section and go to the line that starts as follow: "Designation of the property as a principal residence to the Canada Revenue Agency (CRA)." and answer, "Yes" if the property that was sold was your principal residence as defined by the CRA and enter the address of the principal residence.

9. Next, go to the "Designation" section and select the period (taxation years) during which that property was designated as your principal residence. In the fields that follow, enter the year of beginning and the year of the end as the principal residence.

Then you have to report your rental income in the "Left-side menu on the Interview tab":

1. Select "Rental Income".

2.  On the page that appears to your right, click on the plus sign "+" icon to the right of the line "T776 - Rental Income property".