Sale of 4plex, Owner occupied a unit

Tax Topics
1

Hello All,

I am looking at the meaning of principal residence as per CRA.

Types of property that can qualify as a principal residence

2.7 As indicated in the definition in section 54, the following types of property can qualify as a principal residence:

  • a housing unit, which the CRA has accepted could include:
    • a house;
    • an apartment or unit in a duplex, apartment building or condominium;
    • a cottage;
    • a mobile home;
    • a trailer; or
    • a houseboat.
  • a leasehold interest in a housing unit; or

My client sold her 4-plex where she designated one of the units as principal. I am assuming she has a capital gain on the other 3 units.

What are your thoughts? I am trying to find some information relating to the capital gain on the 3 other units.

2

Confirm use of the units.

4-plex owners used two of the suites as their home - they had 5 children. Haven’t had to deal with a sale but…
It may be possible that both units are principal residence.
I’ll investigate the details if/when there is a sale.

3

Around here, despite the fantasy fairy-stories that clients may be spinning to the tax preparer, what clients may claim is a “4-plex” is, in reality:

  • a house that the City has classified on their books and plans as a “single-family dwelling”, but that the owner has (without planning permitted permission), divided up into basement, main floor, 2nd floor, and attic rooms living areas, which generally would have no chance whatsoever of being approved by City building use inspectors or fire code inspectors…

A detailed examination of the plans, square footage, history, rental income, dates and times of all relevant events, costs and FMV at all relevant particular times, etc etc would be needed to be done.

If she is lucky, a small percentage of the Capital gain may be able to be sheltered by PR, but the rest will be going as regular Schedule 3 CGs…

Presumably she failed to take the advice of a professional accountant when she embarked upon her income-earning enterprises way back when…

Get a retainer up front… this may well end up to be many many hours, and with a tax result that the taxpayer may not like…

4

Helga_spence and Joe.justjoe1

The building is zone as a 4-plex. It was not a house that was converted into separate apartments.

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5

Mine is definitely a four-plex. Our town says if you have more than one rental unit, you have to get a business license. Hard to do that if you are offside.

This was never a house. It was constructed as 4 plex but there is internal access to the basement on each side. Hence, using one side as PR.
The living arrangement supports it. The question will be, does the [tax] law?

6

Each particular province will have its LAND TITLE OFFICE which will have particulars of exactly what (each) the property legally is.

7

If they are using 1/4 of a LEGAL 4 plex, I would calculate one quarter as principal residence at time of sale and I would NOT be going to the land registry office to check on it’s legal status.

8

.

That is so dangerously such a wrong approach that I have no words.

The actual real facts in this case could be almost anything.

9

The facts are easily established in this case, as each title would have each own tax bill…

10

Yes - and in one potential outcome, the results may lead to fairly nicely straightforward calculations.- yay!
However, it could potentially also turn out like a recent case of mine, and lead to a huge amount of hours (and tax)… :frowning:

But in any case, there was apparently a real actual sale, and the vendor and her lawyer has her purchase documentation, her sale documentation, copy of land title certificates, statement of adjustments etc etc all of which the client must give to the tax preparer in the normal course of events.

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