CRA clarifies the operation of the transitional rule for the narrowing of the principal residence exemption for trusts

An estate that qualified as a graduated rate estate with a fiscal period of July 1, 2016 to June 30, 2017, sold the principal residence of the deceased in the first half of 2017. The adult son lived in the home during 2017 before the sale and was a specified beneficiary of the estate as described in the principal residence definition.

CRA confirmed that under the s. 40(6.1) transitional rule, any portion of the gain that accrued after December 31, 2016 would not be eligible for sheltering by the principal residence exemption and would be taxable.

Neal Armstrong. Summary of 16 June 2017 External T.I. 2017-0698181E5 under s. 40(6.1).