TAX PLANNING FROM THE KNOWLEDGE BUREAU
By Evelyn Jacks
Are you planning to sell a personal residence, such as your cottage, in
2017? If so, take note of new tax compliance requirements. Failing to
comply fully with the rules could mean some major tax penalties.
New reporting rules started this past tax season, and they affect everyone
who sells a residence. That’s so even if the property is your tax-free
principal residence for each year you owned it. The reporting is done on
Schedule 3 of the tax return, and the information required includes the
address of the property, the year of acquisition, the proceeds of
disposition, and whether the property will be designated as your principal
residence for the entire ownership period or only a portion.
If the property is not designated as your principal residence for all years
of ownership, a complicated form must be filed to determine the portion of
the gain that is taxable. It’s called a
T2091 Designation of a Property as a Principal Residence by an Individual
(Other than a Personal Trust)
. Any non-exempt gain will be reported on Schedule 3 and one half of the
non-exempt gain will be added to the seller’s income. The taxable gain
could be spread over up to five years if the full proceeds are not received
in the year of sale.
It’s expensive not to comply fully with these new rules: Penalties for late
reporting of a principal residence sale will be $100 per day, to a maximum
However, because the Canada Revenue Agency (CRA) can look back to the 2016
tax year for any audit activity in the future, it’s important to keep good
notes on the reasons for the disposition. The CRA has recently cracked down
on real estate transactions in which the intention was to make a profit by
flipping the property quickly. That has income tax consequences, but could
have GST/HST consequences too. If the intention is to flip the property, or
if the residence is outside of Canada, the home will not qualify for the
new housing rebate on GST/HST paid.
It pays to see a tax professional to check out your obligations to report a
sale, transfer, or deemed disposition of a personal residence anytime after
2015. There are additional rules for non-residents or trusts which hold a
Further, if you have a taxable consequence, remember that your quarterly
tax remittances may be affected, too. Have your tax specialist estimate the
amounts payable in 2017 and 2018 in that case.
originally appeared in the
Knowledge Bureau Report, © 2017 The Knowledge Bureau, Inc. Reprinted with permission. All
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©2017 by Fund Library. All rights reserved.
The foregoing is for general information purposes only and is the opinion
of the writer. No guarantee of investment performance is made or implied.
It is not intended to provide specific personalized advice including,
without limitation, investment, financial, legal, accounting or tax advice.