Ch. 13 Principle Residence & Special personal belongings

Question 1

What is the principal residence exemption

Answer 1

Allows Canadians to be exempt from paying tax on all or part of a capital gain arising on the disposal of the taxpayer’s residence

Total Gain x (1 + Years designated) / Years owned

The 1+ ensures that any year that it is first sold, another property purchased may be exempt - furthermore, only one household can be elected at any time

Question 2

Change in use: Personal to income-producing

Answer 2

Allowed to designate the home as his or her principal residence for up to 4 years after the change in use as long as no CCA is claimed against the income earned on propertly.

But this will cause a deemed disposition at FV.

You can elect to have it not change in use, but then there is no deemed disposition at FV.

Question 3

Change in use: Income producing to personal

Answer 3

If there were no election at the change in use, there is a deemed disposition at FV.

If no CCA was claimed during it was income producing, you can elect out of having deemed dispositions.

This election allows you to claim PRE up to 4 years prior to the year of the change in use.

This cannot be combined with the elction above - may not exceed 4 years when you are changing use.

Question 4

LPPs

Answer 4

Taxable at 50% gain

Proceeds - greater of acutal and $1,000

Cost - greater of actual and $1,000

Losses can be carried back 3 years and forward 7 against LLP