Principle Residence Exemption – Reporting of Sale to CRA

Sold Home For Sale Sign in Front of New House

Last week Finance Minister Bill Morneau announced a number of changes in an effort to limit foreign money into Canadian real estate and ensure borrowers can afford the mortgages they want to take on.  One of these includes reporting the sale of residences to the CRA and including any capital gains.

The 3 most discussed changes are:

  • Effective October 17, 2016 there is a stress test used for approving high-ratio mortgages, that will be applied to all new insured mortgages
  • Effective November 30, 2016 new restrictions will be imposed in providing insurance for low-ratio mortgages
  • The launch of consultations regarding lender risk sharing

But I think the 4th item, also effective in 2016, is what everyone selling a home in Canada should be aware of:

  • Previously when selling your principal residence any financial gain was tax-free and it was not necessary to report the income on the sale. Now, the capital gains tax is still waived, but the sale of the primary residence must be reported to the CRA when filing your personal tax return.

You will need to supply to CRA:

  • Date of purchase
  • Proceeds of disposition
  • Description of the property

Why the changes?

  • Ottawa is responding to extensive media reports indicating foreign investors are flipping homes in Canada and falsely claiming the primary residence exemption
  • Ensures families only claim an exemption on one home a year, and the home owners must live in the property
  • Certifies that if an individual was not a resident of Canada in the year they purchased the residence, and they disposed of that property after October 2, 2016, they are not eligible to claim the exemption for that year

This is also a fact and history-gathering move for Ottawa.  Did you sell a cottage during one of the years, and not pay tax on the capital gains, while you were claiming another address as your principle residence? It could be also be a way flagging a possible “lifestyle audit”.

Do you think this change will curtail foreign investment, or homeowners trying to claim more than one property as a personal residence? Or do you have other concerns regarding this change? I’m interested in hearing your thoughts.

You can  connect with me by clicking the contact tab at the bottom of the screen if you are reading this post on the website or you can leave your information in the form of a comment right here on the site.

Until next time,


Personal Tax Returns and Bankruptcy

21328529_sEvery once in awhile, a tax client that I haven’t seen in a couple of years, returns.  Sadly when I ask them what they have been up to, they will say that they needed to declare bankruptcy.  While there are so many issues to consider when declaring bankruptcy, this blog post will only address personal tax returns and benefits as they relate to bankruptcy.

Personal Tax Returns

The Trustee prepares a pre-bankruptcy tax return for the year of the bankruptcy to the date of the bankruptcy.  If you declared bankruptcy on May 31st, the Trustee will prepare the pre-bankruptcy tax return from January 1st through May 30th.  They will also prepare any personal tax returns not previously filed. Any refunds will be kept by the Trustee for all years that they file.  The Trustee will also prepare the post bankruptcy tax return from May 31st through December 31st.  If taxes are owed on filing of the post-bankruptcy, they must be paid by the debtor.

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5 Ways to Prepare for Networking Events

bigstock-Networking-Group-3149079A few weeks ago, an associate mentioned to me that when she went to a networking event, she knew ahead of time who she wanted to connect with.  I’ve always gone with the plan of talking with whoever wanted to speak with me. I guess I should have been paying more attention to Jim Baston’s  booklet. In it he outlines 5 ways to prepare for networking events, which I’ve summarized below.

1)     Establish your purpose

Your purpose for attending the networking activity is your reason for being there.  Why are you attending this networking opportunity?  What do you want to achieve by attending?  Your purpose will guide the rest of your planning activities.

Your purpose could be something as simple as “To meeting interesting people who someday might buy my product or service”.

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