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oli
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Capital Gains Exemption for Primary Residence

Wed Jul 19, 2017 3:38 am

Anyone sold their house recently with an authorized/unauthorized suite that was rented out?

Assuming the house was your PRIMARY residence, did the rental affect your capital gains exemption?  
 
Geyser
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Re: Capital Gains Exemption for Primary Residence

Thu Jul 20, 2017 7:25 pm

oli wrote:
Anyone sold their house recently with an authorized/unauthorized suite that was rented out?

Assuming the house was your PRIMARY residence, did the rental affect your capital gains exemption?  

It's going to be interesting to see how many people lie to the CRA on their home sale declarations. The CRA can easily see if there is a rented basement suite by cross checking income tax return addresses.
 
VanLord
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Posts: 288
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Re: Capital Gains Exemption for Primary Residence

Thu Jul 20, 2017 7:39 pm

Geyser wrote:
oli wrote:
Anyone sold their house recently with an authorized/unauthorized suite that was rented out?

Assuming the house was your PRIMARY residence, did the rental affect your capital gains exemption?  

It's going to be interesting to see how many people lie to the CRA on their home sale declarations. The CRA can easily see if there is a rented basement suite by cross checking income tax return addresses.

However the three conditions still apply to retain the full exemption.  
2.59 It is the CRA’s practice not to apply the deemed disposition rule, but rather to consider that the entire property retains its nature as a principal residence, where all of the following conditions are met:

a) the income-producing use is ancillary to the main use of the property as a residence;
b) there is no structural change to the property; and
c) no CCA is claimed on the property.
 
oli
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Posts: 69
Joined: Fri Sep 04, 2015 10:00 pm

Re: Capital Gains Exemption for Primary Residence

Tue Jul 25, 2017 9:35 pm

a) the income-producing use is ancillary to the main use of the property as a residence;

"ancillary" in this context means for example a shared kitchen/bathroom?  
Wouldn't most suites satisfy these 3 criteria?
 
VanLord
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Posts: 288
Joined: Fri Aug 24, 2007 3:52 pm

Re: Capital Gains Exemption for Primary Residence

Tue Jul 25, 2017 10:18 pm

oli wrote:
a) the income-producing use is ancillary to the main use of the property as a residence;

"ancillary" in this context means for example a shared kitchen/bathroom?  
Wouldn't most suites satisfy these 3 criteria?


Yes Most suites do satisfy these criteria. Contrary to some misinformation from Geyser and several websites.

I don't believe these rules about capital gains on suites never actually changed. The government is just trying to enforce these rules more carefully. The grey areas is likely the structural changes. In most cases renting out a basement suite as a mortgage helper on a primary residence shouldn't trigger a capital gain
 
Geyser
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Posts: 3569
Joined: Tue Jun 05, 2012 5:26 pm
Location: In a van down by the river

Re: Capital Gains Exemption for Primary Residence

Fri Jul 28, 2017 12:54 pm

VanLord wrote:
oli wrote:
a) the income-producing use is ancillary to the main use of the property as a residence;

"ancillary" in this context means for example a shared kitchen/bathroom?  
Wouldn't most suites satisfy these 3 criteria?


Yes Most suites do satisfy these criteria.  Contrary to some misinformation from Geyser and several websites.

I don't believe these rules about capital gains on suites never actually changed.    The government is just trying to enforce these rules more carefully.  The grey areas is likely the structural changes.  In most cases renting out a basement suite as a mortgage helper on a primary residence shouldn't trigger a capital gain

I agree that many basement suites will not attract the CRA for any reason other than any income they produce. If you have granny living in your basement and all residents have access to the kitchen there is clearly no issue. 
However, if you are renting out a suite which occupies the entire basement level, is sealed off from the rest of the house and has its own separate entrance, kitchen and bathroom, that could be another story.
An even more clear cut case would be where there is also a top floor or attic suite. It would be hard to convince the CRA that the rental activity is ancillary to the primary residential use if the rented square footage is equal to or greater than the primary resident's space.
 
VanLord
Real Estate Talker
Posts: 288
Joined: Fri Aug 24, 2007 3:52 pm

Re: Capital Gains Exemption for Primary Residence

Fri Jul 28, 2017 3:25 pm

Geyser wrote:
VanLord wrote:
oli wrote:
a) the income-producing use is ancillary to the main use of the property as a residence;

"ancillary" in this context means for example a shared kitchen/bathroom?  
Wouldn't most suites satisfy these 3 criteria?


Yes Most suites do satisfy these criteria.  Contrary to some misinformation from Geyser and several websites.

I don't believe these rules about capital gains on suites never actually changed.    The government is just trying to enforce these rules more carefully.  The grey areas is likely the structural changes.  In most cases renting out a basement suite as a mortgage helper on a primary residence shouldn't trigger a capital gain

I agree that many basement suites will not attract the CRA for any reason other than any income they produce. If you have granny living in your basement and all residents have access to the kitchen there is clearly no issue. 
However, if you are renting out a suite which occupies the entire basement level, is sealed off from the rest of the house and has its own separate entrance, kitchen and bathroom, that could be another story.
An even more clear cut case would be where there is also a top floor or attic suite. It would be hard to convince the CRA that the rental activity is ancillary to the primary residential use if the rented square footage is equal to or greater than the primary resident's space.

Geyser I highlighted the key word in your response....at this point in time that hasn't been the case...but yes it could be in the future it the CRA decides to get really sticky in their interpretation...Really they should clarify what structural changes mean.  Is a simple kitchen and bathroom a structure change?  Does screwing the door shut between up and down make it a structural change...how about drywalling the door...removing the stairs?  What if the building was build with a sealed off suite..that's not a structural change by the definition of change.
 
Geyser
Real Estate Talker
Posts: 3569
Joined: Tue Jun 05, 2012 5:26 pm
Location: In a van down by the river

Re: Capital Gains Exemption for Primary Residence

Fri Jul 28, 2017 5:44 pm

VanLord wrote:
Geyser wrote:
VanLord wrote:

Yes Most suites do satisfy these criteria.  Contrary to some misinformation from Geyser and several websites.

I don't believe these rules about capital gains on suites never actually changed.    The government is just trying to enforce these rules more carefully.  The grey areas is likely the structural changes.  In most cases renting out a basement suite as a mortgage helper on a primary residence shouldn't trigger a capital gain

I agree that many basement suites will not attract the CRA for any reason other than any income they produce. If you have granny living in your basement and all residents have access to the kitchen there is clearly no issue. 
However, if you are renting out a suite which occupies the entire basement level, is sealed off from the rest of the house and has its own separate entrance, kitchen and bathroom, that could be another story.
An even more clear cut case would be where there is also a top floor or attic suite. It would be hard to convince the CRA that the rental activity is ancillary to the primary residential use if the rented square footage is equal to or greater than the primary resident's space.

Geyser I highlighted the key word in your response....at this point in time that hasn't been the case...but yes it could be in the future it the CRA decides to get really sticky in their interpretation...Really they should clarify what structural changes mean.  Is a simple kitchen and bathroom a structure change?  Does screwing the door shut between up and down make it a structural change...how about drywalling the door...removing the stairs?  What if the building was build with a sealed off suite..that's not a structural change by the definition of change.

I would think building a single structure with a sealed off full suite including a living room, bedroom, bathroom and kitchen might well be considered a duplex, particularly if it's a large suite. How about a single structure with one large owner's suite and several completely separate rental suites? That sounds like a MURB to me, regardless of its Single Family Home exterior appearance.

Lots of areas of grey for a revenue hungry government to ponder.
 
VanLord
Real Estate Talker
Posts: 288
Joined: Fri Aug 24, 2007 3:52 pm

Re: Capital Gains Exemption for Primary Residence

Fri Jul 28, 2017 6:30 pm

Geyser wrote:
VanLord wrote:
Geyser wrote:
I agree that many basement suites will not attract the CRA for any reason other than any income they produce. If you have granny living in your basement and all residents have access to the kitchen there is clearly no issue. 
However, if you are renting out a suite which occupies the entire basement level, is sealed off from the rest of the house and has its own separate entrance, kitchen and bathroom, that could be another story.
An even more clear cut case would be where there is also a top floor or attic suite. It would be hard to convince the CRA that the rental activity is ancillary to the primary residential use if the rented square footage is equal to or greater than the primary resident's space.

Geyser I highlighted the key word in your response....at this point in time that hasn't been the case...but yes it could be in the future it the CRA decides to get really sticky in their interpretation...Really they should clarify what structural changes mean.  Is a simple kitchen and bathroom a structure change?  Does screwing the door shut between up and down make it a structural change...how about drywalling the door...removing the stairs?  What if the building was build with a sealed off suite..that's not a structural change by the definition of change.

I would think building a single structure with a sealed off full suite including a living room, bedroom, bathroom and kitchen might well be considered a duplex, particularly if it's a large suite. How about a single structure with one large owner's suite and several completely separate rental suites? That sounds like a MURB to me, regardless of its Single Family Home exterior appearance.

Lots of areas of grey for a revenue hungry government to ponder.

Throw in a few Airbnbs and you could really piss off all levels of Government!!
 
Geyser
Real Estate Talker
Posts: 3569
Joined: Tue Jun 05, 2012 5:26 pm
Location: In a van down by the river

Re: Capital Gains Exemption for Primary Residence

Sun Jul 30, 2017 2:23 pm

VanLord wrote:
Geyser wrote:
VanLord wrote:
Geyser I highlighted the key word in your response....at this point in time that hasn't been the case...but yes it could be in the future it the CRA decides to get really sticky in their interpretation...Really they should clarify what structural changes mean.  Is a simple kitchen and bathroom a structure change?  Does screwing the door shut between up and down make it a structural change...how about drywalling the door...removing the stairs?  What if the building was build with a sealed off suite..that's not a structural change by the definition of change.

I would think building a single structure with a sealed off full suite including a living room, bedroom, bathroom and kitchen might well be considered a duplex, particularly if it's a large suite. How about a single structure with one large owner's suite and several completely separate rental suites? That sounds like a MURB to me, regardless of its Single Family Home exterior appearance.

Lots of areas of grey for a revenue hungry government to ponder.




Throw in a few Airbnbs and you could really piss off all levels of Government!!

No kidding!  :lol:

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