201611.16
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Do You Really Have To Report The Sale of Your Own Home?

Do You Really Have To Report The Sale of Your Own Home?

Sold Home: Alberta Divorce Finances

YOU DO NOW!

In the past, if the entire sale proceeds of a taxpayer’s family home were sheltered by the ‘principal residence exemption’, CRA accepted that the disposition did not have to be reported on their tax return. On October 3, 2016, Finance Minister Morneau put an end to ignoring that practice.

From now on, the sale of a principal residence must be reported (likely in a modified Form T2091 – the form used to designate your property as your principal residence, or perhaps in an upcoming amendment to the T1 return itself) in the seller’s tax return for the year of sale. This is true even if the entire gain is fully protected by the principal residence exemption. The first implementation of the new rule will require individuals who sell a home at any time during 2016 (even before October 3, 2016) to report the disposition in their 2016 tax return.

Given the foreign ownership issues in some of our country’s largest cities, the changes are meant to “better ensure that the principal residence exemption is available only in appropriate cases, and in a manner consistent with the Canadian resident and one-property-per-family limits,” the Department of Finance said in its release. We will have to wait and see whether this changes begins to deter foreign ownership.

Regardless, the rules are complex and if you neglect to report these sales, you may end up owing tax. For all of you who prepare your own tax returns, here is just one more reason why that task may be better handled by a professional. Although as I always tell my children, mistakes are opportunities to learn, in this case that mistake may be financially costly as well.

If you would like a consultation or require assistance preparing your income tax return, please do not hesitate to contact us at Sharon@AlbertaDivorceFinances.com or (403)703-7176.