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Tax on selling my condo?

aiekon

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I came across the following article this morning: http://www.thestar.com/business/per...onto_condo_sales_face_tough_tax_scrutiny.html

I'm just curious as how the following would apply to me:
Canada has three tiers of tax treatment for real estate sales — no tax on a principal residence, tax on half a gain from selling a recreational, rental or other investment property, and full taxation for making a business of buying and selling — known colloquially as flipping.

Here's my situation:
- I bought a pre-construction condo in January 2006
- I moved into this condo on December 2009.
- I moved into my partner's condo in December 2012 and am currently renting out mine.

If I were to sell my condo this year or next year, would I be considered as holding a principal residence? Or, would I pay tax on half a gain from selling a "rental or other investment property"?

If I am to be taxed, would I have to move back into my condo for a period of time for it to be considered a principal residence? If so, for how long?
 
If you sold it now or next year technically you would pay tax (50% as a rental property) as its not your primary residence.

If you moved back in it would have to be for 6 months before you could sell with no tax.

Thats how I've interpreted the rules but I could be wrong.
 
Rather than relying on amateurs you should go to the CRA website where there is lots of definitive info. See http://www.cra-arc.gc.ca/tx/ndvdls/...-ncm/lns101-170/127/rsdnc/menu-eng.html?=slnk

If you change the status of a property you may need to get new valuations at each change of use so that any tax is based on only the appropriate period and it certainly makes a difference if you had a rental property and claimed for repair etc expenses. It's complicated and you probably need expert advice - which will probably save you money.
 
I came across the following article this morning: http://www.thestar.com/business/per...onto_condo_sales_face_tough_tax_scrutiny.html

I'm just curious as how the following would apply to me:


Here's my situation:
- I bought a pre-construction condo in January 2006
- I moved into this condo on December 2009.
- I moved into my partner's condo in December 2012 and am currently renting out mine.

If I were to sell my condo this year or next year, would I be considered as holding a principal residence? Or, would I pay tax on half a gain from selling a "rental or other investment property"?

If I am to be taxed, would I have to move back into my condo for a period of time for it to be considered a principal residence? If so, for how long?

As has been mentioned, you should consult a professional.

That being said, I can tell you that when you change the use of a property from non-income-earning to income-earning (as you did in 2012), you are deemed to have disposed of the property at the time of the change for fair-market value proceeds, meaning that you generally have to report the disposition on your tax return and pay any associated capital gains taxes (even though you still own the property, you are deemed to have disposed of it at the time that you started renting it out for the purposes of paying taxes). In your situation, though, it sounds like your condo was your principal residence before you started renting it out, so given that the CRA administratively allows you not to report the disposition of a principal residence on your return you should be fine.

To answer your question, though, if you sell the property this year or in any later year while it's being rented out you will not be considered to have sold your principal residence and will have to pay tax (at capital gains rates) on the gain in the value of the condo between the time you started renting it out and the time you sold it. A caveat to this is that you can make an election in your 2012 tax return (you may be able to make it late if you've already filed, as long as you don't claim CCA on the property in 2013 or afterwards) pursuant to which your condo would still be considered to be your principal residence for up to four years after you started renting it out, which would be useful if you sell it in the next four years.

But anyway, consult a professional.
 
on the gain in the value of the condo between the time you started renting it out and the time you sold it.

How do you figure that amount out? What if you can claim that condo prices have fallen since 2012?
 
How do you figure that amount out? What if you can claim that condo prices have fallen since 2012?

Short of getting a professional valuation I would expect that you could use any method that seemed credible, such as comparing sales of similar properties in the area or something similar (although I've never actually had to do it myself).
 
Wow guys, thanks so much for the feedback! I will reach out to a professional once I decide what my future plans are with my unit.
 

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