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T2091 Capital Gain on rental property - Ontario

Hello,

It is my understanding that a home that was once a primary residence then had a change in use to “rental property” then later sold will result in a capital gain that must be reported on the T2091.

The T2091 creates a pro rated % for the number of years it was a primary residence vs not and applies the % to the capital gain.

This seems to be the consensus among most.

However, I have heard an alternate treatment.

CG = Proceeds - cost(FMV when the change of use occured) -outlays
(the basis of this is - the rental unit was not a personal use property)

Thoughts

The T2091 is used to create a pro rated % for the number of years it was a primary residence vs not and applies the % to the capital gain. (See also T4037 and folio S1-F3-C2) (eg recreational cottage personal use and the like)

This is different from a change of use scenario ( Section 45(1)(a) ), where there is a deemed disposition/acquisition. (eg income producing rental property change).

1 Like

Hello Joe,

Firstly, thank you so much for your response! I REALLY APPRECIATE IT!

To clarify, the scenario I am dealing with is in 2005 the house was
purchased and used as a primary residence till 2014 (when it had a change
in use to a rental property).

Another home was purchased in 2014 (bigger) to live in - growing family

Then in 2016 the rental house was sold (rented from 2014-2016).

To confirm, T2091 does not apply (because the property was not a personal
use property)

-on Sch. 3 Under Principal residence designation I do not click option 1,
2, or 3 (box 179)

The CG calc will be:

On sch.3 in part 4. Real estate, depreciable property, and other
properties

CG = Proceeds - Cost (FMV at change in use) - outlays (real estate & lawyer
fee’s)?

Thank you so much!

Hello Joe,

Firstly, thank you so much for your response! I REALLY APPRECIATE IT!

To clarify, the scenario I am dealing with is in 2005 the house was
purchased and used as a primary residence till 2014 (when it had a change
in use to a rental property).

Another home was purchased in 2014 (bigger) to live in - growing family

Then in 2016 the rental house was sold (rented from 2014-2016).

To confirm, T2091 does not apply (because the property was not a personal
use property)

-on Sch. 3 Under Principal residence designation I do not click option 1,
2, or 3 (box 179)

The CG calc will be:

On sch.3 in part 4. Real estate, depreciable property, and other
properties

CG = Proceeds - Cost (FMV at change in use) - outlays (real estate & lawyer
fee’s)?

Thank you so much!