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T2091 Help!

Hi Pro Tax Community! I am dealing with a client who has sold their principal residence in 2019. I am completing the T2091 however, the property was acquired in 1996 but it changed from the use of a cabin/vacation property to their principal residence in 2003. The client no longer has his tax return from that far back so my question is 2 fold:

  1. When filling out the form it asks for the date of acquisition would this be 1996 or would this be 2003 when the change in use was reported?
  2. Without being able to verify on the 2003 return, how can I ensure that the client reported the change in use and if so what the FMV of the property was at that time.
    I want to make sure that the client isn’t paying the capital gain twice for the overlapping years.

Any help is greatly appreciated!

If the cabin/vacation property was a non-income property and was ordinarily inhabited by the taxpayer, the change of use rules don’t come into play.
Both of them can be principal residences. The tax payer just has to choose which one.
If they sold their former residence in 2003 and designated it as principal residence, then the cabin can be designated as principal residence for 2004 to 2019. [providing there are no other properties they would like to choose as p.r.]
Providing there was no change of use [from income to pers for the cabin], the acquisition date would be 1996. So when you select the cabin to be principal residence for 2004 to 2019, the period 1996 to 2003 would not qualify for the p.r.exemption and that portion of the capital gain would be taxable.

https://www.canada.ca/en/revenue-agency/services/tax/technical-information/income-tax/income-tax-folios-index/series-1-individuals/folio-3-family-unit-issues/income-tax-folio-s1-f3-c2-principal-residence.html#toc5

Hi Rein,

Thank you for your response, it was very helpful!

The property was never an income earning property which is where I was getting mixed up.

In ’96 the land was purchased for a minimal amount compared to what the entire developed property was sold for last year. Is there an opportunity to amend the declaration of their PR that sold in
2003 and revise the PR designation for ’96 – ’03 so that the cabin can qualify for the PR exemption for the entire time it was owned?

I only ask because the other property would have had minimal gain from the time it was purchased to the time it was sold; particularly, in comparison to buying a plot of land and developing, building,
landscaping, into what it was when it was sold.

Thank you again for your help!

I doubt CRA would accept an amendment to a 2003 tax return. Your are talking about a tax return more than 10 years ago.