Change of Use Principle Residence

[mrobertsonca]

Hi there, I am trying to calculate the portion of the capital gain on a property since I changed the use.  I bought it in 2018, then in 2019 I started renting it out.  So when I put in what I paid for, and sold it for, there should be a third value for the value that it was in 2019 on deemed dispostion (ie.  change of use from principle residence to rental).  I've claimed all my rental expenses the last couple years...but I believe it's now calculating the gain from the day I bought it, not the value it was when I started renting it.

 

Can you please help?

[clw]

Do you want to claim this property as a principle residence for 2018? Are you filling in form T2091?

This link may help: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/personal-income/line-12700-capital-gains/principal-residence-other-real-estate.html

 

[TheTaxSmith]

Hello robertsonca,

It looks like you used the 2018 Adjusted Cost Base (ACB), what you paid for it, on the rental CCA schedule. Did you get a Fair Market Valuation (FMV) at the time you started renting it? Did you claim any Capital Cost Allowance (CCA) for the years you rented it?

Now to recognize the years it was a principle residence, which might only be one, you need to complete the form for disposition of a principle residence to exempt the years it was a principle residence.

For the rental statement the CCA schedule needs to have the FMV as the cost and Proceeds of Disposition recorded to correctly calculate any gain and possible recapture of CCA.

You also need to understand what the actual ACB is. Legal fees, transfer taxes, appraisals, inspections, bank fees, etc, are acquisition costs not expenses so hopefully you did not claim those against rental income.

Trust that does not muddy the water for you.