Looking for a luxury spa like bathroom.
For more information click on photo or call Michael Leclerc (204)792-6453.
Definition of “Principal Residence”
The changes to the principal residence exemption for capital gains on sales of homes in Canada. While still exempt from capital gains tax, principal residence will be assessed the tax if the occupants lived there less than a year. The discussion has given rise to a legal discussion on what exactly constitutes a “principal residence” for a person? The importance of a seller being able to define a house for sale as their “principal residence” is that if it is, then they can avoid the capital gains tax on the profit achieved on sale when they file their income tax return. If the client is wrong (according to CRA) with their assumption that the property is their principal residence, it could be expensive for them. Clients (and us) should be aware that if CRA characterizes the sale of the house as “an adventure in the nature of trade”, they do not consider this a principal residence and then they will classify the sale profits as business income to the seller. If there is a disagreement on whether a sale is a capital gain between a taxpayer and the CRA, and it cannot be resolved then it can go to the relevant courts for a decision. When deciding if a property is in fact a person’s principal residence, they look at things like the nature of the property (historically a rental?). How long did the person own and live there? Was the taxpayer involved in house transactions on a frequent basis up to that point? how much work was put into the property? And the circumstances that dictated the reason for sale of the property. Effectively the court wants to see a true intent to make the house a person’s main home, the place they truly lived in and kept as such. You could imagine how, when a person is challenged on this it could be complicated for them.
Complimentary Legal Advice at AVS Law LLP Please click AVS logo below
**as always, every situation is different and laws can change if you have doubts, call us
GORD STEEVES
B.A., LL.B.
Barrister, Solicitor and Notary Public
200‑600 St. Anne’s Road
WINNIPEG, MB., R2M 2S2
Direct Tel: 431.478.1280
Tel: 204.254.3511
Fax: 204.257.5139
Email: gord@avdkslaw.ca
Web: www.avslaw.ca
Leave a Reply