Foreign principal residence

Tax Topics
1

A client owned a foreign rental property since 2018, which has been reported on the T1135 (no CCA claimed). In 2025, the property was converted to personal use, and the client intends to use it as his principal residence. This is the only property he owns and PR conditions seem to be met.

I will file 45(3) election in the year of sale for the PR designation for the extra 4 years (2021-2024) and beginning with the 2026 T1, I will stop filing the T1135. But how about the T1135 returns filed for 2018-2025? Should they remain as filed?

2

Uh - do Canadian Principal Residence rules apply to his home in a foreign country?

3

Yes, if the person is a Canadian resident. I’ve claimed the PRE on the sale of a US property for a Cdn resident client.

4

If he moved into the property in 2025, are you sure he is still considered “resident in Canada”?

In any case, designating it as his PR doesn’t change the fact that it is still a foreign property and that he earned rental income in those years. So, no - it wouldn’t affect the prior years’ T1135s.