Designation of a property as a principal residenceSince the changes regarding the sale of a principal residence were introduced in 2016, the new rules apply to deemed dispositions of property.
For example, there will be a deemed disposition in the event of a change in the use of the property if:
A. You have changed all or part of your principal residence to a commercial or rental activity.
B. You have changed your commercial or rental activity to a principal residence.
C. You wish to designate your second home as your principal residence. The CRA considers that when you change the use of a property, it is generally considered that you sold the property at its fair market value and that you immediately acquired it again at the same amount.You must report the disposition in the year in which the change of use occurs.
For more information, please consult these following links:
Please consult the note 9.
To declare a deemed disposition of property, please follow these steps:
1. In the "Left-side menu on the Interview Tab", select the "Interview Setup" topic.
2. On the screen to your right, go to the "Investment income and expenses" group, check the box "Capital gains (or losses) and capital gain history" and click "Next" at the bottom of the page.
3. Return to the "Left-side menu on the Interview tab" and choose "Capital gains (or losses) & ABIL".
4. On the right-hand page, click the plus sign "+" icon to the right of the line "Real estate and other depreciable property".
5. A new page will appear, enter the relevant information of the first five (5) fields. On the "Proceeds of disposition" line and on the "Adjusted cost base of the property" line, enter the fair market value of the residence.
6. If your spouse was the co-owner of the residence with you, on the line "Your percentage share of capital gain/loss recorded here", enter your participation percentage.
7. In line "Do you wish to transfer the remainder to your spouse's tax return (if applicable)?" The program will generate the documents in your spouse's return.
8. For the line "Class No. of property" in the drop-down menu, choose the category that suits you.
9. In the "Principal residence" section, go to the line "Designation of the property as a principal residence" and answer "Yes" if the property becomes your principal residence and enter the address of your principal residence in the following fields.
NOTE: For residents of Quebec, you confirm that all information provided corresponds to the information you provide to Revenu Québec.
10. In the "Designation" section, select the year in which the residence became your principal residence.
11. On the line, "Change in use of property and election under section 284 or 286.1" and answer "Yes".
12. Answer the following questions.
Schedule 3 will be generated by the program and on page 2 of this Schedule, box 2 will be identified to indicate that for some years the residence was not your principal residence.
In addition, Form T2091 "Designation of a property as a principal residence by an individual" will be generated by the program.
Furthermore, for Quebec residents, Schedule G and TP-274 will be produced by the program.
If for point 9 your answer was negative, you must send all required paper documents to Revenu Québec as well as your Quebec return.
ID: 20200218105349DE.xml
Webpage: KPA330-20200218105349DE.htm