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.

[Webftpmaster]

Hi sorry for hijacking this topic but I have a similar question:

I sold my principal house in 2022 and purchased another one.  simple.

What would I enter in these fields please?

- Proceeds of disposition
- Adjusted cost base of the property
- Expenses incurred in making the disposition

Knowing:

I sold the main residence for 518,000.00$
I originally bought it 5 years ago for 285,000.00$

I paid 25,219.00$ in fees when I sold the house (notary, certificates, commission, etc.)

I'm really struggling with the terminology.

Thanks!
 

[Geo123]

Hello Webftpmaster,

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 2022?". The sale of a principal residence must now be reported along 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.
10. However, if you have not permanently resided in your principal residence, click the plus sign "+ Add another" icon to create another occupancy period for your residence.  < - - NOT APPLICABLE in your case
11 If you rented your residence during the unoccupied period, go to the line "Change in use of property and election under section 284 or 286.1", and by selecting "Yes" a field will be created to indicate the period (from what year to what year) during which the residence was leased. < - - NOT APPLICABLE in your case
Schedule 3 will be generated, as well as page 2 of this schedule by the program which will indicate that the property was your principal residence for all the years during which you were the owner.
In addition, Form T2091 "Designation of a property as a principal residence by an individual" will be generated by the program.
Moreover, for residents of Quebec, Schedule G and Form TP-274 will be produced by the program.
Also see :
https://www.youtube.com/watch?v=PFfD45fnqgg