I bought a residential property in 2019, but immediately began leasing it without moving in. From 2019 to 2023, I lived in another property as a tenant.
Then I moved into this property in 2023 (this became my principal residence) and lived there for a year, before selling the property in 2024.
I mailed the CRA in 2024, designating this property under late 45(2), requesting that they acknowledge my request, but have not received a response (it’s been almost half a year, and it’s tax season soon). I did not make payment for late penalty when I mailed the election request, hoping that they accept it without imposing one.
Since I leased the unit immediately upon purchasing, is it a “deemed disposition” and the proceeds from sale is deemed business income?
I’m overall quite confused as to what to do. Is my situation complicated enough to hire a professional accountant to do my taxes this year and perhaps have them file another late 45(2) with proof of mail?
Sounds like it is a rental property from the beginning although that may not have been your original intention. You could research a 45(3) Election possibly.
It always amazes me when people make decisions that can cost them indeterminate amounts of money, but won’t spend a few bucks up front getting advice first.
AS @arliss says…you don’t have a Sec 45(2) claim (you never resided there so you can’t have had a “change in use”). You might be able to do a Sec 45(3) but free advice on a forum is worth what you paid for it (unlike free advice as between members as tax pros).
Agreed! People are too cheap to spend a few hundred on an accountant but will waste thousands of dollars in taxes and fees on poorly planned transactions.
FYI - the penalty for late filed 45(2) is $100 per month. Although as others said, it likely doesn’t apply here anyway.
Mr. X bought a house in 2003 and rented it to a third party until mid-2009. Mr. X and his family then lived in the house until it was sold in 2011. Mr. X has been resident in Canada at all times. When he filed his 2011 income tax return, Mr. X designated the house as his principal residence for the 2009 to 2011 tax years inclusive, by virtue of his having ordinarily inhabited it during those years. He also designated the house as his principal residence for the 2005 to 2008 years inclusive (that is, the maximum 4 years) by virtue of a subsection 45(3) election, which he filed with his 2011 income tax return (he was able to make this designation because (i) no other property had been designated by him or a member of his family unit for those years, and (ii) he did not claim any CCA when reporting the net income from the property before the change in use). However, his gain otherwise determined on the disposition of the house in 2011 could not be fully eliminated by the principal residence exemption formula because he could not designate the house as his principal residence for the 2003 and 2004 years.
