Hi David
My parents, who were non-resident at the time, bought an unbuilt
(at the time) 2 bedroom unit several years ago with the intention
of retiring into it when the complex was completed. The complex
was completed before they could sell their business overseas, so
they were delayed in making their move back to Vancouver. In the
meantime I rented it out to cover the mortgage and property tax
costs.
They have since retired and moved to Vancouver, and have
reclaimed their 2 bedroom unit to live in as their primary
residence. The CGA that they have consulted insists that there is
a capital gains tax due and it is payable immediately since there
has been a change in use. Is this true, why would there be a
capital gains tax due if : 1.) there is no deemed disposition and
2.)_they purchased it to live in as their primary residence?
I believe I read one of your newsletters in which you state that
an election can be made to defer capital gains tax until they
actually dispose of/ sell the property. If this is so, can you
please tell me what process/ election needs to be filed.
Thank you.
W xxxxxxxxxxx
================================================
david ingram replies:
The CGA is correct. When anyone moves into a property they have
rented out, there is a deemed disposition and capital gains (or
losses) must be calculated and form part of the income tax return
for the year the owner moved in.
However, Section 45(3) of the Income tax act allows them to
acknowledge the taxable income on line 127 and elect to defer
paying the tax (with no interest or penalty) until the property
is actually sold by deducting it on line 256 of the tax return..
And what, pray tell are you doing allowing your non-resident and
now immigrant parents to deal with any one but us.
tsk! tsk! tsk!
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