Selling rental property after election 45(2)

Tax Topics
1

Hope everyone is doing well.

I’m totally confused and doing lot of reading but no conclusion.

  1. Bought apartment in 2020 for 500k.
  2. Lived there till 2022 March.
  3. Bought another house and moved there and started renting out the first one.
  4. I did market appraisal when moving out from realtor and it came as 700k.
  5. Then I filed election 45 (2) asking CRA to treat the property as rental property and current market price is 700k.
  6. Got confirmation letter from CRA after 4 months, they said they now have this info on file.
  7. Sold the rental property in June 2023 for 650k.
  8. Now filing taxes for 2023 and have some doubts.

Please let me know which scenarios is correct or both are correct.

  1. I report the sale as rental property. Select real estate, depricable property option in Schedule 3 form and claim Capital loss. Do I need T2091 in this case?
  2. I report it as sale of PR and add form T2091. If i add T2091, do i select first option in Schedule 3 principal residence section or 2nd option. No capital gain/loss with PRE if select option 1. or If option 2, add new FMV when i moved out.

Thanks

2

You have a lot of things going on there, and various options with differing tax consequences. Too much to explain here in a simple post. Suggest you meet with an accountant, and pay them for a half hour or so to explain it all.

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3

Hello @Nezzer

Thanks for the reply.

I decided to do the taxes myself. But if needed I’ll check with consultant.

Can you please confirm if this scenario is ok? Do i need to report it with T2091?

  1. I report the sale as rental property. Select real estate, depricable property option in Schedule 3 form and claim Capital loss. Do I need T2091 in this case?
4

It depends whether you want to claim the principal residence exemption, and for which years, and on which property. I suspect you probably won’t want to report it as you have outlined, but it requires a conversation, with several questions, to determine which tax consequences you prefer.

5

Hi @Nezzer

Really thanks for your reply.

My main preference is claim any capital losses and carry them over.

As I had sold it for less. 50k less when i moved out and started renting it out. Is it possible to claim any capital losses? I’m trying to do this for now.

If capital losses not possible, then just report the sale and be done with it without paying any capital gains.
I think in this case I would mark my sold property as PR till 2022 as i lived there till 2022 and plus one will take me to 2023 when i sold it. So PRE for it.
Then same goes for my current property, i started living there from 2022. I would designate it PR from 2023 and plus one would cover 2022. Is my understanding correct in about PRE in this scenario?

6

I will never understand why people will risk thousands in tax, interest and penalties instead of paying a tax pro a few hundred bucks to sort an issue.

Always amazing to me.

“Penny wise, pound foolish.”

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