Principal Residence new Rules on Tax Reporting
Thursday, 13 October 2016
Posted by Charles Russell CPA
October 13, 2016
Selling a Principal Residence- New Reporting to Canada Revenue Agency “CRA”.
A recent change in the CRA’s administrative position means that, if you sell your principal residence (“PR”) in 2016, or in later years, you must report: a) the sale (i.e. the date of acquisition, the proceeds of disposition and a description of the property), and b) the principal residence designation, on your income tax return to claim the full principal residence exemption.
CRA plans to modify Schedule 3, “Capital Gains (or Losses),” to handle the new required information. If the property was your principal residence for all years of ownership, the designation can be made on Schedule 3. Otherwise, a separate prescribed form needs be completed in addition to the Schedule 3 reporting. This latter indication applies to any time in the hold period where a change of use, such as for rental purposes, was in effect.
In the past, CRA previously said that no reporting was required on the sale when the home was your principal residence for each year of ownership..in spite of the Income Tax Act. After 2015, if you do not report the sale of the principal residence and its designation as PR in the year of sale, you can request the CRA to amend your income tax return at a later date, however a Penalty may apply.
For 2016 reporting, there is an apparent grace period where an otherwise penalty amount would apply.
Some consideration must be given to joint or co-ownership!
Often, such as for older taxpayers, an additional person, such as a child of the owner, is added to title on the PR. This is a transfer of ownership and suggests the possibility that a reporting may need be done for the year of the transfer.
For the many people owning a second or third property, the mechanics of PR are substantially more complex as a whole, in that the designation through the hold periods needs be carefully determined.
The above are general comments in nature and not to be acted upon without consulting an expert.
For further information call or email the writer!
Charles Russell CPA, CA