A taxpayer went through a change in use of their property, converting it from a principal residence to an income-producing asset. As a result, a deemed disposition under subsection 45(1) applies. Although subsection 45(2) was explained to them, they have opted to proceed with the deemed disposition route. I will prepare Section 3 and Form T2091 accordingly.
My question is on the info page of the tax return do I check off yes or no to:
Did the taxpayer sell a home in 2024 and want to claim the principal residence exception?
You should make sure they have an appraisal of the house to substantiate the value of the property. That value will now be the ACB of the income-producing property.
Yes if no election is made and the property was their principal residence prior to renting it, you would select Yes to that question for the year the change in use occurred.
A senior accountant once told me: if the property’s value aligns with similar homes in the area and reflects typical market appreciation, a real estate agent’s valuation is usually sufficient. However, if you’re defending a value outside these norms, it’s best to hire a professional appraiser.
Technically a real estate agent is not an appraiser. If you want to go that route you are taking a risk. If you go with a real estate agents value, at a minimum you want to have proof what similar houses were sold for in the area.
