Hi David, I currently live and work in Alberta but would like to buy an apartment for my wife and 2 children to live in Vancouver( they are currently living in > Van) > > My question is: If we were to buy an apartment and I moved back to > vancouver > in say 3 months and we decided that the apartment was too small, and we > then > sold it would we have to pay capital gains. > > Thank you > > Mathew Barlett > > --------------------------------------------------------------------------------------------- > david ingram replies: > > > QUESTION: > > Dear Sir, > I heard about that there is a capital gain examption on the principle > resident. Is that the full amount can be exampted or the examption only to > certain amount? > ---------------------------------------- > david ingram replies: > > If you only own one house and live in that house, there is no limit on the > profit from the sale of the principle or personal residence. > > This assumes that you bought the house to live in as a residence and not > to > flip and are trying to make it "look" like your reason for buying it was > to > live in it for a long time. > > The following older question will give you an idea of the timing. > -============== > I just moved into my new condo at XXXXX two weeks ago, my agent is already > after me with a price I can hardly refuse. Couple of questions about tax > implications. How long do we have to live in a place to qualify for > capital > gains tax exemption as principal residence. I also read in an income tax > self help guide book that in Canada we can sell our principal residence > once > a year capital gains tax exempt, is this correct? > > Thanks. > ============================================================================ > == > david ingram answers: > > There is no absolute answer. Each one is based upon the individual facts > but let me try. > > One: The buying and selling of a house by itself is a venture in the > nature > of trade and subject to tax at ordinary tax rates. Therefore, if "anyone" > buys a house and puts it up for sale when they buy it or fixes it up and > sells it, the profit is taxable at ordinary tax rates. i.e. a $20,000 > profit would be taxed at the same rate as interest, rents or wages. > > Two: If the house was bought to rent out and one rented it out for ten > years or twenty years and then sold it for any reason at all, the profit > would be considered a capital gain and only 50% would be taxable at normal > rates. > > Three: But if one bought a house to sell and that was demonstrated by > the > fact that it was listed soon after purchase and then rented out (because > the > market dropped) for ten or fifteen years, the CCRA would likely try and > tax > any profit on the sale as straight income because the "intention" was to > flip it which is a straight business income. > > Four if one bought a house to live in it and did so for twenty years, it > would be a tax free principal residence "UNLESS" there was a summer cabin > or > a Whistler ski cabin which they claimed as their tax free residence for > the > same period. In that case, the cabin is tax free and the house they lived > in is taxed at capital gains rates. > > Five: If one bought a little house and lived in it for five years and > then bought another house because they had twins and needed a larger > house, > the sale of the first one would be tax free and in my opinion if life's > circumstances changed every five years and a family moved every five years > because of a life change, each house would be tax free. > > Six: However, if one bought a "fixer upper" and lived in it for four > years and sold it and bought another fixer upper and sold it four or five > years later and then bought another one, etc., the CCRA would likely try > and > tax the second and third house if the CCRA became aware of the > carpentry/renovations part of the sales. Four or five years apart would > likely escape the attention of the CCRA but two or three years would > likely > get their attention. > > Seven: If one bought their dream house and were transferred to another > city two weeks after they moved in, the sale would be a tax free principal > residence sale. > > Eight: If one bought a house and someone offered an "unreal profit" two > weeks later and they sold, the CCRA would likely want to tax the profit as > a > straight income. The reason is simple. You might think that because it > was > an unsolicited offer it is not taxable but that is not the case. There > was > no reason to sell other than a profit. That fact alone can make it a > venture in the nature of trade. > > Nine: However, if one bought a house or condo and five days after > moving > in found out they were pregnant and would need a bigger condo or the > penthouse in the same building became available, or they could not stand > their neighbour or there was a smell from a pulp mill or their wife was > unexpectedly" afraid to walk down the street because of muggers, > prostitutes > or drug dealers or because she was propositioned by "johns" every time > she > went out the door, putting the place up for sale two weeks after moving in > and actively soliciting a buyer would likely still leave a tax free > principal residence sale. > > Another rule of thumb. If the land registry show three buys and sells in > a > one year period, it has been my experience that the person can expect to > have their return scrutinized to see what is been reported. So if you sell > your house in May, 2003, buy another in May and sell in June and buy > another > in July, the CCRA is very likely to take a look. > > And, I believe that the answer to the question above is that the CCRA > would > tax the sale if they spotted it. > > If the subject building has had several people buy a condo and flip it (I > do > not recognize the building's name), then this person is likely to get > caught > by the CCRA looking at the whole building for flippers. > > Log on to www.centa.com, click on tax guide and then on the capital gain > section to read a bunch of actual tax cases where a lot of people paid > straight income tax on items they wanted to claim tax free. > > A direct link would be to http://www.centa.com/taxguide/capital_gains.htm > > Last but not least, any self-help book that says you can sell a principal > residence every year should be taken off the shelves immediately. > > Hope this helps > > Answers to this and other similar questions can be obtained free on Air > every Sunday morning. > > Every Sunday at 9:00 AM on 600AM in Vancouver, Fred Snyder of Cartier > Partners and I will be hosting an INFOMERCIAL but LIVE talk show called > "ITS > YOUR MONEY" > > Those outside of the Lower Mainland will be able to listen on the internet > at > > www.600AM.com > > Local phone calls to (604) 280-0600 - Long distance calls to > 1-866-778-0600. > > Old shows are archived at the site. > > > > This from ask an income tax immigration planning and bankruptcy expert > consultant guru or preparer from www.centa.com or www.jurock.com or > www.featureweb.com. Canadian David Ingram deals daily with tax returns > dealing with expatriate: > multi jurisdictional cross and trans border expatriate gambling refunds > for > the United States, Canada Mexico Great Britain the United Kingdom, Kuwait, > Dubai, Saudi Arabia, South Africa, Thailand, Indonesia, Egypt, > Antarctica, > Japan, China, New Zealand, France, Germany, Spain, Italy, Russia, Georgia, > Brazil, Peru, Ecuador, Bolivia, Scotland, Ireland, Hawaii, Florida, > Montana, > Morocco, Israel, Iraq, Iran, India, Pakistan, Afghanistan, Mali, Bangkok, > Greenland, Iceland, Cuba, Bahamas, Bermuda, Barbados, St Vincent, > Grenada,, > Virgin Islands, US, UK, GB, American and Canadian and Mexican and any of > the > 43 states with state tax returns, etc. > income tax wizard wizzard guru advisor advisors experts specialist > specialists consultants taxmen taxman tax woman planner planning > > preparer of Alaska, Alabama, Arkansas, Arizona, > California Denver Colorado, Connecticut, > Delaware District of Columbia Miami Florida, > Garland Georgia, Honolulu Hawaii, Idaho, Illinois, > Indiana Des Moines Iowa Kansas Kentucky, > Louisiana Bangor Maine Maryland Boston, Massachusetts, Michigan, > Minnesota, > Mississippi, Missouri, Montana, Nebraska, > Nevada, New Hampshire, New Jersey, > New Mexico, New York, North Carolina, > North Dakota, Ohio, Oklahoma, Oregon. > Paris, Rome, Sydney, Australia Hilton > Pennsylvania, Rhode Island, Rockwall, > South Carolina, South Dakota, Tennessee, > Texas, Utah, Vermont, Virginia, > West Virginia, Wisconsin, Wyoming, > British Columbia, Alberta, Saskatchewan, > Manitoba, Ontario, Quebec City, > New Brunswick, Prince Edward Island, > Nova Scotia, Newfoundland, Yukon and > Northwest and Nunavit Territories, > Mount Vernon, Eumenclaw, Coos Bay > and Dallas Houston Rockwall Garland > Texas Taxman and Tax Guru and wizzard > wizard - > > David Ingram's US/Canada Services > US/Canada/Mexico Tax Immigration & working Visa Specialists > US / Canada Real Estate Specialists > 4466 Prospect Road (Personal residence by appointment only please) > North Vancouver, BC, CANADA, V7N 3L7 > Calls accepted from 10 AM to 10 PM 7 days a week > Res (604) 980-3578 Cell (604) 657-8451 > Bus (604) 980-0321 Fax (604) 980- 0325 > davidingram at shaw.ca www.david-ingram.com > > Disclaimer: This question has been answered > without detailed information or consultation and > is to be regarded only as general comment. > > Nothing in this message is or should be construed > as advice in any particular circumstances. No contract > exists between the reader & the author and any and all > non-contractual duties are expressly denied. All readers should obtain > formal advice from a competent financial, or real estate planner or > advisor > & appropriately qualified legal practitioner, tax or immigration > specialist > in connection with personal or business affairs such as at www.centa.com. > --- > David Ingram gives expert income tax & immigration help to non-resident > Americans & Canadians from New York to California to Saudi Arabia to > Mexico to China or Chile - Cross border, dual citizen - out of country > investments are all handled with competence & authority. >
