Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: General information on the principal residence exemption.
Position: See below.
Reasons: See below.
XXXXXXXXXX
2013-050147
K. Robinson
August 22, 2013
Dear XXXXXXXXXX:
Re: Principal Residence
We are writing in response to your letter of August 6, 2013, requesting our comments with respect to the income tax implications concerning the sale of your residence. You indicated that you sold your residence because an industrial entity wanted the property to expand its facilities and that you purchased a new residence with the money you received from that sale.
Our Comments
Written confirmations of the tax implications inherent in particular transactions are provided by this Directorate where the transactions are proposed and are the subject matter of an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, "Advance Income Tax Rulings", dated May 17, 2002. This Information Circular and other Canada Revenue Agency ("CRA") publications can be accessed on the internet at http://www.cra-arc.gc.ca/formspubs/menu-e.html. Where a particular transaction has already been completed, a review of the relevant facts and circumstances surrounding the situation would be required. Such review would normally be conducted by the applicable Tax Services Office during the course of an income tax audit which, if undertaken, would be carried out after the particular taxpayer has prepared and filed its income tax return for the year. Notwithstanding the foregoing, we are prepared to provide the following comments that may be of assistance.
If a property qualifies as a taxpayer's principal residence, an exemption can be claimed under paragraph 40(2)(b) of the Income Tax Act ("Act") to reduce or eliminate any capital gain otherwise realized on the disposition of the property. The term principal residence is defined in section 54 of the Act. Generally, in order for a property to qualify for a designation as a taxpayer's principal residence for a taxation year, it must be demonstrated, among other things, that he or she owns the property, and that it is ordinarily inhabited in the year by the taxpayer or the spouse or common-law partner, former spouse or common-law partner or child, of the taxpayer. A taxpayer can designate only one property as a principal residence for a particular taxation year and, for taxation years after 1981, only one property per family unit can be designated as a principal residence.
For more information on the principal residence exemption, please refer to Income Tax Folio S1-F3-C2: "Principal Residence", which is available on the CRA Web site at http://www.cra-arc.gc.ca/tx/tchncl/ncmtx/fls/s1/f3/s1-f3-c2-eng.html#N101C7.
We trust that these comments will be of assistance.
Yours truly,
Michael Cooke, C.P.A., C.A.
Manager
Business Income and Capital Transaction Section
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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