One of my client already own a residential house and living in it, he also have a rental property too. He entered in purchase agreement of a house with the developer. Due to delay in completion he sold this house. He received part of the amount in 2020 and will get the rest in 2024.
My questions are:
Capital gains on the sale of real estate when payment is in installments, you can actually defer capital gain by creating capital gains reserve. To claim this reserve, form T2017 in schedule 3 must be completed and submitted with your personal tax return for the year of sale. Claiming this reserve will allow the deferral of capital gains for a maximum of five years.
First of all, was there a gain? If he didn’t go through with the purchase, how could he have anything to do with the sale?
If he was making payments toward the purchase, but didn’t complete it, perhaps he just got his money back? That is, no sale to report, and no gain.
If he was actually the owner of the property, and sold a house under construction, it is unlikely he would have much of a gain to report (proceeds minus cost of construction).
I assume the rental property has nothing to do with this story. Assuming your client isn’t a frequent real estate “flipper” or has other factors that lead this to be business income, it sounds as though the sale of this partially completed house would be a capital gain. Even when claiming the maximum 5 year capital gains reserve, your client will generally have to include 1/5th of the capital gain in income each year but you should go through the calculations for your client’s gain. He should check to see whether he can claim the GST/HST New Housing Rebate, too. You should look at CRA’s publication T4037 for capital gains info.