There is only one real number field on this form to fill, it is the “Proceeds of Disposition”.
I just want to clarify here. I believe I take my asking price from the house I sold, then subtract the original price I paid for the house. Then I should be able to yet again subtract all my other real-estate lawyer fees I paid for the transaction of the sale, correct?
Just want to make sure, on the latter part, but generally IIRC your fees are always subtract-able from the gains.
Proceeds of sale would be the gross sale price before any deductions. There are other “real” numbers. The year of purchase is important in cases where the client may have or had a second property since you can’t double-up on designations in any year.
If you are just referring to the Principal Residence area of the Schedule 3 the only monetary data that gets entered are your Proceeds of Disposition. As @kevin mentioned, this is your Gross Selling Proceeds (without deducting your costs). Depending on how you answer the questions in field 17900 you may need to calculate your actual gain by entering the other amounts you reference on a different form.
@snoplowguy to piggyback off what you are saying. So this is the first year someone has sold their home.( so just need to brush myself up on the correct things I am to ask for and fill on the tax return)
So as someone else said above you would take the original purchase price of the home and then minus what you sold it for and then also minus all the lawyer and real estate costs. ( So back in the day I know that was what we had to do and then other rules if they were also used for rental)
but to just stick with the principal residence. So my client just sold their home in 2022 and purchased a new home in Alberta. So on S3 at the bottom ( principal residence I need to know the proceeds of dispositions) What questions do I ask my client so I can get the proper information? Also, field 17900 (1) is checked off as all year’s principal residence.
Darn now reading the 3 boxes not sure how to answer it is such a tricky question. They lived in their home as a principal residence from the day they purchased it until the day they sold it. So please guide me to which one is the best box for me to check off.
I am trying to be very careful with my word. I am poor with grammar so please people do not pick on my grammar LOL. But I am being careful because I know many people get very angry when people are not detailed.
Thank you to those who are kind enough to help me with my question.
I don’t think anyone here is angry. We as a group tend to be finicky, persnickety [not to use another word], and like to to split hairs .
You need to make sure they don’t have any other property that they use as a principal residence.
If they only had the one for all the years they owned the one they just sold, it is the first box.
In that case you need to know the year they acquired the property and I would get the statement of adjustments to make sure they give you the proper sales amount. They sometimes will give you the amount on the trust ledger which is not the correct sales amount.
If they had other properties that they used as a principal residence there is quite a bit more involved.
yes split hair would have been a better choice of words LOL
They have no other properties this was their first home. When you say proper sales amount do you mean the amount of money they received or the amount the house sold for? I want to make sure I use the correct $ figure.
@sherry … I’ve attached a sample Statement of Adjustments to help you understand which figure to use on Schedule 3 for the Principal Residence Designation forms. The red arrow should clarify things for you. In situations where the Principal Residence ownership is shared (ie: husband/wife or a 3rd party), then I allocate the appropriate percentage to each of them.
@sherry, what is your client’s understanding about reporting the sale of his/her Principal Residence? Does your client have a full understanding about it? Was it explained clearly to him/her to help educate them about it? Was literature provided (from CRA, links to media articles about it, etc), so they could read about it themselves and develop a better understanding of it? The penalties for late filing can be quite steep.
NB: Point 7 in this link discusses penalties for failure to comply.
The penalty is the lesser of the following amounts:
$100 for each complete month from the original due date to the date your request was made in a form satisfactory to the CRA.
If a person filed (past tense) their taxes not knowing that reporting the sale of their principal residence is now required by legislation, a letter can be submitted to CRA with a copy of Schedule 3 and the signed T2091 explaining the situation. I’ve had success where CRA has accepted the late form and waved late filing penalties.
If, on the other hand, your client has been educated on the legislation and blatantly refuses to comply, as a tax practitioner knowing this, I would direct the client to find someone else to file their taxes (or file it themselves) vs being complicit and assisting them with their non-compliance.
Unfortunately, some clients believe that there is no reason to give anyone more information than is absolutely necessary to do the job. Then think that the information necessary is unnecessary.
Welcome to preparing tax returns for people who prefer to believe “the conversation that they had in the bar 15 years ago,” rather than someone who is working in this field professionally.
I will add that my father was also in that category and fought me on making an application for the disability tax credit for 6 years. His argument collapsed when he got a cheque from the CRA for $15,000 and I pointed out that he could have had more had he listened to me six years earlier.
I had a client just last week who brought me their tax papers and only gave me the BLANK T5008 slip leaving out the additional pages showing they disposed of almost $67,000 shares in 2022. They clearly dismissed this as not being relevant and none of my business. Luckily CRA had this info and I was able to record it properly on their taxes and provide some education to them. This story had a happy ending in that they had a capital loss which I was able to apply to a previous capital gain.
I have been working in tax since 2000 for the 1999 tax year. During my first twelve years in tax preparation I worked with every client as long as they paid my fee.
I understand that I need to earn trust. I try my best to cover this area during the on-boarding process.
Now I do the following:
A-- If the issue is simply fear of the unknown, then I work to overcome their fears with calm and solutions. I include a one year warranty on my tax preparation for all documented income and claims.
B-- If the issue is secrecy or mental illness then I determine as quickly as I can if this is workable in two years, one year and done, or sever ties during the first engagement. Personally, I find that the revenue from one personal tax return is not worth the PITA and on-going customer service effort. This has greatly reduced the stress of tax session and endless warranty issues of those who willfully or reactively hide facts and documents.
C-- Of course, for friends and family we may be in it for the long haul, as per @TimParris. For these I have endless patience, calm and quiet/gentle persistence. I have a group of these for whom I am in it for the long haul.
I’m with you on that, @dominique_dabolczi. I worked in adolescent psychiatry for 32 years and have also been doing taxation since 2000. The majority of my clients return year after year, often because of the extra value above taxation that they get when they see me. I have a small number of clients who have mental health issues, so they appreciate that I understand.
HAHA yes I have a spouse who fought be for the DTC for a few years but was pretty happy when I finally stepped up and asked his DR to fill out the paper work. So he was braging to many people after that LOL.
Well once I sent this person the proof that I needed to report his sale. He did send me his information. Thank you for your message