My question is: Canadian-specific
QUESTION: I understand that there is no capital gains on your residence
home. A friend of mine owns 4 houses, 3 are rented and she is living in one.
According to her, if she sells the one she is living in, there is no capital
gains. Then she moves to the second house, lives there for 1 year and when
she sells it, she will not incur capital gains.
Is this true?
An accountant told me that you are only allowed one residence home to
qualify for NO Capital gains in your life time. Can you please clarify this
for me?
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david ingram replies.
Your friend (or you) can sell the house she lives in and claim it free of
capital gains tax.
She can thjen move into a second house. However, there is then a DEEMED
sale with the change of use from a rental to a principal residence and she
owes capital gains tax on any increase in value WHEN SHE MOVES IN. If she
lives in it for a year, any increase in value would be free of capital gains
tax as her principal residence for the year. However, she owes tax on "THAT
Year's" tax return for the increase in value before she moved in.
If and only IF she files an election under section 45(3) within 90 days can
she delay paying the tax until she actually sells the property and has the
cash.
The same thing applies to houses three and four.
The rule is not one tax free house in a lifetime but one tax free house
(that you bought to live in for a long time) per year. So if the house you
live in is tax free that year, any other house you own whether rented (or a
personal ski or summer cabin) are taxable for any increase in value in the
same year.
David Ingram of the CEN-TA REALTY Group
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
108-100 Park Royal South
West Vancouver, BC, CANADA, V7T 1A2
(604) 913-9133 - Fax 913-9123 [email protected]
www.centa.com www.david-ingram.com
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