My question is: Canadian-specific
QUESTION: My mother lives in White Rock and purchased her house in 1986 for
$99,000. This is her principal residence. She is now interested in selling
her house which is currently valued at approx $650,000. Will she be
required to pay any capital gains tax?
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david ingram replies:
The easy answer is to say that there is no tax on any amount of profit on
your mother's White Rock House.
However, we are talking 19 years from 1986 to 2005 and a lot can happen in
19 years.
For instance, if your mother and father had also owned a waterfront estate
on Saltspring Island or a big house in Whistler and their "seasonal" home
went up more than the house in White Rock and dad passed away three years
ago and the Whistler or Saltspring place was sold with a $1,000,000 profit,
the wise thing to do would have been to claim the seasonal home tax free as
their principal residence. In that case, the profit on the White Rock House
would be taxable on a prorated basis for the time that the seasonal house
was claimed tax free.
To do the calculation, you must prepare form T2091 available at the CRA
website or click here:
http://www.cra-arc.gc.ca/E/pbg/tf/t2091_ind/t2091-ind-04e.pdf
the T2091 worksheet is at
http://www.cra-arc.gc.ca/E/pbg/tf/t2091_ind_-ws/t2091-ind-ws-04e.pdf
However, if there was no second residence during that time, the house in
White Rock is 100% tax free if she lived in it as her principal residence or
designated it as her principal residence under section 45(2).
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