I have a new client. She left Canada in 2018 and became a non resident. She kept her house in bc and rented out since 2018. She filed non resident tax under 216 since 2018. In 2021 she sold the house and got the Certificate of Compliance T2062 and T2062A. I have the following questions regarding her income tax.
Should she file election under section 45(2) change in use together with 2018 tax return because the property changed from principal residence to rental when she left Canada?
When I look up the rule, real estate in Canada is not subject to deemed disposition when leaving Canada. So when she disposed the property in 2021, how was capital gain calculated? Is ACB the purchase cost? Can she have principal residence exemption for the years she lived in the property as tax resident?
Thanks.
She needs to be a resident during the 4 years under section 45(2) election; therefore, she cannot use this election because she became a non-resident after 2018.
She can still apply for the principal residence exemption for the years before 2018 (and including 2018) if the property qualifies as her principal residence when she was a resident. You can use S3 and T2091 to designate the years.
She can also elect to declare the deemed disposition of real property on the 2018 tax return (need to also complete T2061A, as well as T1161 and T1243) if this option is more beneficial. I don’t think it’s a good idea to go back and make the change if the 2018 tax return was already filed (retroactive tax planning).
Thanks Janelle! That is exactly what I did for this return, no section 45(2) election and claim PRE in T2091 and S3. I am waiting for CRA’s assessment.