This past week the Federal government announced a change to Canada Revenue Agency’s administrative policy on reporting the sale of a principal residence, effective starting with transactions in 2016.
For sales prior to 2016 you did not have to report the sale of your principal residence on your income tax return when you were eligible for the full principal residence exemption because the property was your principal residence for every year that you owned it. Starting with sales that occur on or after January 1, 2016, you will be required to report the year of acquisition, the proceeds of the disposition, and a description (address) of the property even where you claim the full principal residence exemption and so owe no tax in respect of the sale of the property.
Prior to 2016 you could claim the principal residence exemption without reporting the disposition on your income tax return. Starting with sale on or after January 1, 2016, you will only be eligible for the principal residence exemption if you report the sale on your income tax return. Under the proposed changes Canada Revenue Agency will be able to accept a late designation in certain circumstances, but a penalty will apply equal to the lesser of $8,000 or $100 for each complete month after the original due date.
Please call our office if you have any questions. We would be happy to arrange a meeting to discuss how these measures may apply to your situation, assist you with the preparation and filing of your tax returns, and discuss tax planning opportunities.