What classifies a Principal Residence

My pre-construction condo is now almost ready, however i do not intend to keep it as due to some personal situation changes, I am looking to buy a bigger place. As this was my first home and i want to use HBP at the time of closing, How can i make this condo my Principal residence even though, I do not intend to live in it ? (as i also want to save on taxes etc when i sell this which i understand is only possible if it is my Principal residence). Any pointers will be much appreciated.

Thank You

This PDF link might be helpful: www.cra-arc.gc.ca/E/pub/tp/it120r6/it120r6-e.pdf

In my personal experience, all you need to do is simply designate on your income taxes which property you wish to assign as your primary residence and given you don't change that property's status, no capital gains will be applicable for the future sale of that property. By law, I believe (and perhaps someone can correct me if I'm wrong) as long as you have mail delivered to a particular address, you are deemed to be living at that address.

You have to "ordinarily inhabit" the condo during the year in which you plan to claim your principal residence exemption. This doesn't mean that you have to live there full-time, but you can't just change your mailing address (that might work if they don't look into it too closely, and frankly I'm not sure if this is common practice or not, but if they ask questions and find out that you never actually resided there at any point, they'll almost certainly reassess you and impose penalties).

"Ordinarily inhabit" isn't actually defined, so it's hard to say what it means. There was a case where a couple moved in to their new-construction condo for one night and that wasn't enough. Here's a link to the CRA's views on principal residences: http://www.cra-arc.gc.ca/E/pub/tp/it120r6/it120r6-e.html, but it would probably be best to just ask your real estate lawyer what would be good enough.

Thank You James and Hank - all this information is much useful and certainly helps me clear some doubt about the subject of this thread. Much appreciated.

zaindo said:

My pre-construction condo is now almost ready, however i do not intend to keep it as due to some personal situation changes, I am looking to buy a bigger place. As this was my first home and i want to use HBP at the time of closing, How can i make this condo my Principal residence even though, I do not intend to live in it ? (as i also want to save on taxes etc when i sell this which i understand is only possible if it is my Principal residence). Any pointers will be much appreciated.

Thank You

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Believe it or not, whether or not HST is applicable to an assignment/sale depends on the original intention (in the mind of the assignor/seller) when the offer to purchase was made with the builder. If the PRIMARY PURPOSE by the assignor/seller in buying from the builder was to profit by assigning/flipping the deal, then HST IS APPLICABLE to the assignment/sale.

On the other hand, if an individual originally signed an offer to purchase a condo apartment (to be newly constructed by a builder) with the primary intention that the unit bought would be used (for example) by:

(1) a son or daughter when attending University/College, OR
(2) a parent who wanted or needed a place to reside, or
(3) a spouse who planned to separate from the family, or
(4) the buyer(s) who intended to downsize, or
(5) the buyer(s) who intended to use the apartment when working downtown or when visiting Toronto
(6) a son or daughter who was engaged to be married, or
(7) buyer wanted to move closer to a workplace OR to relocate a place of work

THEN the Canada Revenue Agency would typically conclude that HST is NOT applicable on the assignment/sale if (at a later date) a reasonable change in circumstance resulted in an assignment/sale of the unit if, for example,

(1) such son/daughter chose not to go to University/College, or
(2) the buyer's mom or dad no longer could use or wanted to use such apartment as a residence
(due to their death or needs a retirement home), or
(3) intention to separate from family changed, or
(4) decision was made later not to downsize, or
(5) the buyer(s) reasonably changed his/their minds about such intended use, or
(6) the engaged son or daughter decided not to marry or decided to live elsewhere, or
(7) the workplace location changed or the intended relocation of workplace changed

The question is whether the facts or circumstances would indicate to the Canada Revenue Agency that the condo was originally being acquired from the builder for the primary purpose of personal use versus buying the unit for only a potential profit with the intention of assigning or flipping the deal.

Hope this helps!

Don't hesitate to ask if you have any questions.

Angie

The confusion of HBP and HST would probably be a clue, but let me just say: Be careful getting your tax advice from the Interwebz, folks.

zaindo said:

Thank You James and Hank - all this information is much useful and certainly helps me clear some doubt about the subject of this thread. Much appreciated.

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Links given by James and Hank will take you to the same publication of CRA --IT-120R6: Principal Residence.

To be able to designate a property as a principal residence, you must have owned the property --not sale by way of assignment or during the occupany period. Further, you must have been ordinarily inhabitating in the property.

Both these terms are explained in para 4 & 5 of the above publication.

KA1 said:

Links given by James and Hank will take you to the same publication of CRA --IT-120R6: Principal Residence.

To be able to designate a property as a principal residence, you must have owned the property --not sale by way of assignment or during the occupany period. Further, you must have been ordinarily inhabitating in the property.

Both these terms are explained in para 4 & 5 of the above publication.

Click to expand...

So if you bought a property through assignment it can't be considered a principal residence? If true, that's ridiculous.

TheKingEast said:

So if you bought a property through assignment it can't be considered a principal residence? If true, that's ridiculous.

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There is a bit of confusion here. Either you have not read the original question properly or, perhaps, I did not explain the situation properly. Anyway, here I go again.

The question was related to the pre-construction condo that the poster/purchaser did not wish to keep.

One could sell a pre-con unit on 'assignment' or, perhaps, during the occupancy period. If this is done, then, a unit can not be designated as a principal residence simply because the title to the unit had not been transferred to the seller.

If a unit is sold after the title has been transferred -- that is, after the occupancy period --,then, it can be designated as a principal residence.

Paragraph 4 of IT-120 explains 'ownership' and paragraph 5 explains as to what is considered to be a 'principal' residence by CRA. Perhaps, you might wish to click on the appropriate link and read paragraphs 4 & 5