Client sold her cottage and house in 2023. The cottage was bought in 1969 and the house was bought in 1991. The capital gain on the cottage was much greater than the capital gain on the house. She wants to claim the PRE for all the years she owned the cottage. Can she in addition claim the PRE on the house for one year plus?
Hi Al, You get one home to claim PRE except in the year you purchase another home, that’s when the “Plus One” comes into play. So in your scenario, they cannot overlap the disposition of both the Cottage and the House in the PRE claim.
“2.28 - While only one property may be designated as a taxpayer’s principal residence for a particular tax year, the principal residence exemption rules recognize that the taxpayer can have two residences in the same year, that is, where one residence is sold and another acquired in the same year. The effect of the one plus in variable B in the formula in [2.20] is to treat both properties as a principal residence in such a year, even though only one of them may be designated as such for that year.”
She must be quite the age.
Some questions for consideration.
Did she own another home or homes previous to the home purchased in 1991?
Does or did she have a spouse?
Did she take advantage of the 1994 capital gains election?
You mention that the cottage gain was much more than the gain on the house.
Is this TOTAL, or gain per year?
You didn’t mention when the house was purchased.
All is good. Question has been answered.