How to input an ACB based on an assessment done when converting a Principle Residence to a Rental Property

[Taxing Matters]

I am reporting the sale of a condo that was my principle residence from 2006 to 2014, then rented out from 2014 to 2021.  At the time I began renting it I had a professional assessment done, so would like to enter that value as the ACB of the property for the calculation of capital gains from 2014 to 2021 (which will be 0).  Should I just enter that value and wait for CRA to possibly ask me to justify it, or should I paper file my taxes and include a letter and a copy of the assessment?  I did not at any time during the rental period ask for any CCA.

Thanks in advance for any advice!

[TheTaxSmith]

Just enter the value and wait for CRA to respond. If you paper file with a letter they will most likely contact you. Keep all documentation. CRA can ask for a Certified Appraisal so if it was done by anyone not certified you could have an argument on your hands. Most CRA auditors are reasonable.

[Taxing Matters]

49 minutes ago, TheTaxSmith said:

Just enter the value and wait for CRA to respond. If you paper file with a letter they will most likely contact you. Keep all documentation. CRA can ask for a Certified Appraisal so if it was done by anyone not certified you could have an argument on your hands. Most CRA auditors are reasonable.

Thank you very much TTS, but I forgot to ask one question, what should I put for the date of acquisition, the original date in 2006 or the date of the assessment and beginning of rental, 2014?

Thanks again!

[TheTaxSmith]

Date of appraisal and start of rental.

[Taxing Matters]

Will do, and I really appreciate your helpful guidance.

[Taxing Matters]

Ah sorry to bother again, but now the Ufile program is warning that;

T2091/T1255 - Designation of property as a principal residence

The designation period is before the year of acquisition. Click here to fix

 

Should I then change the date of acquisition back to 2006, or just answer no to the question did you sell a principal residence in 2021, i.e not even mention that it was once a principal residence?

 

 

 

[TheTaxSmith]

If you did not report the gain on the principal residence when you made the change to rental you could have a problem with CRA. That said you could respond with No to the question. Several years ago CRA indicated they would Levy penalties on not reporting the disposition of a principal residence. Prior to that year they never really followed up. You could indicate the principal residence disposition using the original cost and the value on the appraisal as disposition proceeds with the original purchase date and the 2021 disparate on a separate principal residence disposition schedule, and still answer No as mentioned above as a work around.

[Taxing Matters]

Thanks for your continued patience..  OK I tried that, entering two different purchases and sales of the same condo, with the first sale listed as a principal residence sale 2006 to 2014, and the second with No as the answer to the PR question, 2014 to 2021.  Again the program will allow electronic filing, but again a warning message, this one saying the disposition date is before the minimum date (which should be in 2021)

The date value for this field is before the required minimum.

The date should be '01-01-2021' or after, you have entered '21-04-2014'. Click here to review your data.

 

So I am just not sure which of these warnings is more of a red flag to CRA, it seems both indicate a missing deemed disposition that was not filed in 2014, but the second method (this one) more clearly states the amends I am trying to make...

[TheTaxSmith]

Use a 2021 date instead of 2014 in the principal residence form. If CRA contacts you just explain what you were trying to do and all should be ok.

[Taxing Matters]

Actually I can't change the disposition date to 2021 for the PR sale because then the Ufile program has no warnings but concludes that large amounts of capital gains taxes are owing based on the proportion of the PR period over the entire period of ownership.  

So since in every scenario discussed above there is a warning flag or an inappropriate tax levy, I think I will just go back to the original tentative plan I indicated to begin with, and take your advice to just file it, and keep all records in case they ask about the (elevated) ACB I used for the acquisition.  As you say everything will probably be OK when I explain what I was trying to do, and if they want to charge penalties for what I am doing I feel I have some pretty good considerations in my favour;

Thanks again for explaining so much.

[TheTaxSmith]

Ok so you entered to number of years personal use on the same form. That will produce a problem. Go back to the original approach and be ready for any challenges.  I suspect you will not have a problem.