My_question_is: Canadian-specific
Subject: tax status of a persons house who has had to move into a
nursing home.
Expert: taxman at centa.com
Date: Thursday November 18, 2004
Time: 08:58 AM -0800
QUESTION:
My wife's mother had to be placed in a nursing home about two years ago.
She has not sold her house and her husband has predeceased her. Her house
has been rented out to offset some of the cost of the nursing home. The
specific questions are: How long can she rent it out and still consider the
property her principal residence? She has been declaring the rental income
on her income tax returns. Are there any implications or suggestions re:
paying of these taxes or is it done the same way a person would treat a
bonafide income property?
Thanks for you help. Hope you are doing well personally. Regards, LXXXXX
--------------------------------------------
david ingram replies:
Doing fine. $4,860,000 bankruptcy now over and I should have the divorce
over at end of January. I am likely the luckiest guy in North Vancouver.
Back to your question. The house can be rented for 4 years officially and
because of the way that form T2091 reads, you actually get 5 years. If the
rental had been the result of a job transfer, there is no four year
limitation.
The form and worksheet are at:
form
http://www.cra-arc.gc.ca/E/pbg/tf/t2091_ind/t2091_ind-03e.pdf
The worksheet is at:
http://www.cra-arc.gc.ca/E/pbg/tf/t2091_ind_-ws/t2091_ind_ws-03e.pdf
To take advantage of form T2091, you are supposed to have made an election
under Section 45(2). There is no "form" for this. Simply attach a note to
the tax return stating: "I hereby elect to treat (the address) as my
personal residence even though I do not ordinarily inhabit the residence.
If you did not do this, then make sure you attach it to the 2004 return form
T776. When you do this, make the statement: "I hereby elect to treat this
residence as my personal residence for the years 2002, 2003 and 2004. Of
course, you would start with the first year of rental. I have never had the
CRA turn down a late election made in good faith.
Filing form T776 to report the rent on a T1 General tax return is the only
way to go.
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