My question is: Canadian-specific
QUESTION: Hello
My husband and I have recently bought a mobile home on an acre in Nelson to move to in a few years when we find work there, or much later when we retire. We currently live in a rented apartment near Vancouver as we work in town. Our mobile home is rented out to tenants and we intend to let them stay until we would like to move to Nelson. It is the only home that we own but it is rented out until we can move there. Can you let us know how that would affect us in terms of Capital Gains? I know that each year we will have to claim the rental income and write off our costs for the mobile home / land against it. Thank you very much for your feedback.
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david ingramn replies:
When you move into the former rental, it is considered a deemed disposal and re-acquisiton. Capital Gains tax is due and payable on any increase in value at that time.
UNLESS
If while renting, you did NOT claim CCA (Capital cost Allowance) or depreciation on the T776 (rental schedule), you can defer paying the tax at that time though.
When you do move in, calculate the increase in value and report Half on schedule 3 of your return and half on schedule 3 of your husband's return That schedule will, in turn, result in one half of the half being put on line 127 of your return as taxable income.
You can now write a letter to the Tax office stating: " I hereby elect to defer opaying the tax triggered by my moving into my rental property under Section 45(3) of the income tax act."
You then write the amount on line 127 on line 256 where it is subtracted from taxable income. Write - see election letter beside line 256.
These older Questions are in the same vein. �
