My question is: Canadian-specific QUESTION: If a person owns a principle residence in Alberta for 1 year. Then rents it for 1 and a half years and sells it. At what point would capital gains be in effect? Thank you, ----------------------------------------------------------------- --------- david ingram replies: In Canada, a principal residence may be sold completely free of any income tax. To qualify, the home must have been intended for use as a principal residence. In other words, if you bought it with the intention of fixing it up and selling it, even if you lived in it for a year while doing so, it would be taxable at full rates. In addition, a person is allowed to rent his or her principal residence out for up to four years without paying tax and for any length of time if the rental is because they were transferred out of the city. To qualify in that case, the person must continue to work for the same company in the other city. In other words, if the person was transferred to Toronto and left the house rented out while transferred and quit that job and took another one in Toronto, the exemption would be cancelled. To claim the exemption while rented, the taxpayer must file an election under section 45(20 of the income tax act. The exemption is not printed by the CRA and there is no specific form. You would just attach a note or letter to your tax return stating: I hereby elect under section 45(2) of the Income Tax Act to designate this property at XXXXXXX as my principal residence even though I do not ordinarily inhabit it. After the sale, you would have to fill out form T2091 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, I, david ingram am a permanent guest on Fred Snyder of Dundee Wealth Managers' 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 Call (604) 280-0600 to have your question answered. BC listeners can also call 1-866-778-0600. Callers to the show and questioners on this board can also attend the Thursday Night seminars on finance and making your Canadian Mortgage Interest deductible. David Ingram's US/Canada Services US / Canada / Mexico tax, Immigration and working Visa Specialists US / Canada Real Estate Specialists Home office at: 4466 Prospect Road North Vancouver, BC, CANADA, V7N 3L7 Cell (604) 657-8451 - (604) 980-0321 Fax (604) 980-0325 Calls welcomed from 9 AM to 9 PM 7 days a week (please do not fax or phone outside of those hours as this is a home office) email to taxman at centa.com www.centa.com 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 and the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent and appropriately qualified legal practitioner or tax specialist in connection with personal or business affairs such as at www.centa.com. 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