I have the following fact pattern and I am wondering if my analysis is
correct.
1. Person A becomes a Permanent Resident of Canada.
2. Person A buys a house as principal residence January 2001.
3. Person A ceases to be a permanent Resident of Canada January 2004 by
decree of Citizenship & Immigration Canada.
4. Person A sells his principal residence January, 2005.
Tax consequences on the sale:
1. If the house sells, Person A is a non-resident.
2. Holdback is 25% of the sale price.
3. Person A can claim the principal residence exemption for any increase in
value to January 1, 2004 and pay tax as an investment (capital gain) on any
increase from Jan. 1, 2004 to Jan 1, 2005.
Am I correct?
David Stoller
==============================================================
david ingram replies:
You are likely correct. However, if the house was still occupied by family
members, and not rented, person A may be a factual resident of Canada (even
if not allowed in the country) for tax purposes, in which case the house
would be tax free until sold.
In the alternative, he or she can file a t2062 and avoid 25% withholding on
the entire sales price by getting a certificate allowing the 25% withholding
on the profit only. AND, if the house was rented from Jan 2004 to Jan 2005
and includes Jan 2005, person A must also file a T2062A for the sale and a
2004 and 2004 Section 216(4) rental tax return for each year.
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