Canadian Money Forum banner

1 - 5 of 5 Posts

·
Registered
Joined
·
1 Posts
Discussion Starter #1
Hello all,
I would really appreciate expert advise before a big decision and here is my situation:
August 2009 I bought a 1 bedroom condo (first time buyer).
I lived in it until Feb 2011 when I moved in with my fiancee. At that time I got a tenant to rent it out.
Today I would like to sell it to start a business but I want to know exactly what to expect to see if I will break even or not and how much I can expect.
Can someone help me figure out Capital Gain Tax, Early repayment fees and other fees I may not be aware of?
Obviously I'd like to make the most of it but if it's a mistake to sell I'd like to know before hand.

Thank you all in advance for your time and advice.
 

·
Registered
Joined
·
6,745 Posts
What address are you going to use on your 2011 return? If you use the old address, then you are probably safe. Also your cohabitation can make your relationship deemed common-law.

To do what the CRA expects:
1) Claim the rent as income
2) Declare any gain since Feb 2011 as capital gain
3) Declare your new residence on Dec 31, 2011
4) Claim your fiancee as a common-law spouse.
 

·
Registered
Joined
·
465 Posts
4) Claim your fiancee as a common-law spouse.
Unless there are children (theirs) involved, they are not considered common law by CRA for income tax purposes until Jan 2012, as they moved in with each other in Feb 2011. So he can use the new residential address without declaring c/l status. The catch is that if there are GST credits, Ontario credits or CTB credits involved, they should have declared c/l right at the beginning to those authorities.
 

·
Banned
Joined
·
91 Posts
Reading the facts again this morning, I had not picked up on the fact that you wouldn't have filed your personal return for the first portion of the rental period. This is what I would look in to doing:

1) File a 45(2) election with your 2011 tax return, which allows you to temporarily avoid the capital gain that resulted from the deemed disposition of the property on the day of the change to income producing.
2) Claim rental income and related expenditures on your 2011 tax return, but DO NOT CLAIM CCA.
3) Sell your condo immediately.

Due to the calculation of the principal residence deduction for capital gains, it is possible to rent the property out for exactly 1 year without paying a capital gain. The principal residence exemption reduces the capital gain as follows:

Capital gain as calculated x (Years as principal residence + 1)/(# of years home owned)

As you can see, the formula allows for leeway of 1 year to reduce the capital gain completely. There are some stipulations to utilizing the 45(2) election, but just guessing, I think you will be safe. The 2 important factors are (1) you are not designating another property as your principal residence during the period in which the 45(2) election has been filed and (2) your spouse has not designated another property as their principal residence during the period that the 45(2) election has been filed.

I'm assuming you are safe on (1) and for (2), as you have not yet become common law so you are OK there.

I'd also like to add a disclaimer that I am not a tax expert. I would seek counsel from a professional.
 
1 - 5 of 5 Posts
Top