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Living in condo during occupancy period and assigning it. No capital gains as principle residence.

416ForLife

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I have a friend living in his condo during the occupancy period and his only option to sell is to assign it. He fully intended to move and live there as his primary home and all of his accounts (bank, employee home address, etc) have been changed to there. Due to lending regulations that came into effect since initial purchase and before occupancy he is having a difficult time finding a lender to give him a mortgage.

He is, however, able to sell at a profit. Considering this is his principle residence, is he still exempt from capital gains given that every intention was to occupy as personal residence rather than as investments.

Any case tax law regarding this? Any advice? Any documentation he should be collecting incase the taxman comes calling afterwards?
 

RZ12

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You gotta live in for one year to be exempt from capital gains.

B-Lenders sure would loan at higher interest rate.
 
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lenaitch

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Certainly not an accountant or tax lawyer, and I'm not sure what an "occupancy period" is, but I would suggest your friend seek professional advice. I would think the CRA will view actual circumstance rather than intentions. There is a declaration on personal tax returns asking if you have disposed of real property in the reporting year. Of course, one can say no, but there is always jeopardy. There is a disconnect between federal taxation and (provincial) title registry records which they are slowly closing. There is a minimum period of actual principal residency necessary to avoid both capital gains and GST but I can't recall if it is one year or two.

Edit - RZ12 types faster.
 

416ForLife

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You gotta live in for one year to be exempt from capital gains.

B-Lenders sure would loan at higher interest rate.
I understand 1 year is an assumed general guideline but not tax code. Am looking for specific case law, but I will recommend a tax lawyer.
 

RZ12

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I understand 1 year is an assumed general guideline but not tax code. Am looking for specific case law, but I will recommend a tax lawyer.

That's why pre-construction now is so strict on the mortgage pre-approvals. They want peoples intention to close. How is your friend struggling to get a mortgage with old pre-con prices?
 

416ForLife

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I think he'll find a lender who will give him a mortgage if he looks hard enough. Honestly, I think he is looking for an exit and considering it is his current principle residence wants to understand the tax law re: capital gains. That will impact his decision to assign, or hold and sell, etc...
 

RZ12

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I think he'll find a lender who will give him a mortgage if he looks hard enough. Honestly, I think he is looking for an exit and considering it is his current principle residence wants to understand the tax law re: capital gains. That will impact his decision to assign, or hold and sell, etc...

Theres no way hes not paying capital gains unless he lives in it for a year...
 

RZ12

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416ForLife

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That's not what the wording says or means.

Read this. As per my interpretation it would in fact qualify. There is nothing there about a minimum of one year.

 

416ForLife

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You are right. I think he can manage the capital gains with some finagling anyway. Will recommend talking to a real estate / tax lawyer for advice.
 

ash_p

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I pulled this....

“When a new condo unit is ready for occupancy, the buyer is often given possession before ownership. In other words, residents can move in to the unit, but title will not be transferred until some time later when the entire condo development is fully constructed and registered. Thus, it is important to note that the period of occupancy before final closing, or the “interim occupancy period”, is included in the one-year time clocks that are outlined in the “first use” requirement above.”

From this article...
 

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