I have a new couple coming on board. His home became rental property in 2020 when they moved into her home. Now selling but he does not have complete returns showing what was and wasn’t expensed.
Q. Does or will CRA have a complete copy of his T776 forms for those years or should that be with the client or previous tax preparer? I want to make sure I claim Capital Gains correctly when doing the principal residence election.
Thank you and Merry Christmas and/or The best of the Festive Season to all…
No. But, what of the T776 do you need for calculating capital gains? You should ensure you have the T776 history in case there was CCA taken (might be recapture), but the period expenses do not affect the CG calculation. And, yes, the client should ALWAYS have complete copies of their prior tax returns - that is legally required of everyone. If they want you to contact their previous tax preparer, that preparer will need the client to give them permission to release information to you, so the client might as well just get the info themselves and then give you a copy.
Further expanding on this… Unless a 45(2) election was filed in the year of change in use, PRE will not apply regardless of CCA for any years the home was a rental. But yes you need to know if/how much CCA was taken in order to calculate recapture.
If the property was used as a rental, subsection 45(1) applies. The extent that it applies is provided by the T776 as filed and if a 45(2) election was applied.
I will comment that the CRA is pursuing capital gains based on 45(1) rules. And it would be wise to obtain a licensed property evaluator for the revaluation under 45(1)(c)(i)(B), they no longer accept real estate agent evaluations. Unless you get a CRA employee who hasn’t received the revised instructions, in which case, shut your flipping mouth!
Are we having a discussion regarding change of use here? My original comment is with regards to reporting capital gains (not on 776 obviously) rather than interpreting if Section 45 is applicable… there are plenty of other threads on this discussion…
@TimParris are you suggesting that CRA may disallow the PRE for the years designated if no valuation was obtained at the time of change in use? I have not experienced this and just want to make sure I understand correctly. Thanks.