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Change of use not reported in 2017


mrq2
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Bought a condo in 2013 and lived in it until 2017 when I rented it out (bought another condo to live in). I did not declare a change in use at the time (Did you sell a principle residence in 2017 = NO). I always thought, until now, this hole issue of capital gains and when there was a change of use would be settled when I decide to sell that condo in the future. I declared all my rental income. I live in Quebec.

How do I now make this right?? What are my options??

Thanks 

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  • mrq2 changed the title to Change of use not reported in 2017
  • 4 weeks later...

You can submit a late-filed S.45(2) election to CRA. The election allows you to deem that there was no chnage in use and you will still be able to deem  the property as your principal residence for up to 4 years. You can late-file the election as long as you didn't claim CCA on the property. It will be late filed, as it should have been filed by Apr 30/18, and you will need to pay a late-filing penalty. 

https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/ic07-1/taxpayer-relief-provisions-1r1.html

Here's another link with some info:

https://www.rktaxlaw.com/s-452-election-and-the-changes-in-use-of-property/

 

 

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To the best of my knowledge all elections need to be timely filed. However, you would only want to file an election if you really wanted to designate the property you decided to rent out as your principal residence. If this was not a concern and you want to consider your new residence as your principal residence you need not worry about it. Don't take my word for it - double check with the CRA. 

Ultimately, when you do sell the rental property you will designate it as your principal residence from 2013 to 2017 and be exempt from any gain accrued during this period. You will be taxed on the capital gain (if any) based on the proceeds of sale less the fair market value of your property at the time you converted the property to a rental property. You may use your property tax evaluation or an appraisal from a certified real estate broker to establish this amount. 

Here are two YouTube videos that may help: 

 

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