Designation of a property as a principal
residence
Since 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:
https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/federal-government-budgets/budget-2016-growing-middle-class/reporting-sale-your-principal-residence-individuals.html
Please consult the note 9.
https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/personal-income/line-127-capital-gains/principal-residence-other-real-estate/what-a-principal-residence.html
https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/personal-income/line-127-capital-gains/principal-residence-other-real-estate/designating-a-principal-residence.html
https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/personal-income/line-127-capital-gains/principal-residence-other-real-estate/changes-use.htm
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
