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Is Selling a Home In London Ontario Taxable

  Is selling a home in London Ontario taxable? What about my principal residence?

The gain on the sale of real estate is a capital gain unless the property has been purchased with the intent of reselling at a profit, or developed and sold as a business endeavourIf it is considered a business transaction, the entire profit or loss on the sale is taxable or deductible.

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If the transaction is a capital gain (principal residence, summer cottage, second home, rental home, etc.), only 50% of the gain is taxable.

If the property is the taxpayer’s principal residence, this may eliminate all or part of the capital gain.  This exemption is claimed by including form T2091(IND) with the tax return for the year the property is sold.  CRA’s policy is that the form need not be filed unless there is a taxable gain after deducting the principal residence exemption, or a capital gains election was filed in respect of the property in the taxpayer’s income tax return for 1994.

However, if there is any question as to whether the principal residence exemption applies in whole or in part, it would be wise to file the form anyway because failure to file the form could result in a disallowed principal residence exemption.

There aren’t any set rules about how often a person can buy or build a house, move into and reside in it, then sell it, without the transactions being considered business transactions.  Canada Revenue Agency (CRA) would look at the frequency and the intent (i.e., whether the houses were being purchased or built with the goal of reselling and making a profit, or because the person wanted a new house to live in).

  They might even look at a single event of purchasing or building and reselling a house and decide that it was a business transaction, even if the house has been used as a principal residence.  Check out the current version of S1-F3-C2, re profits on the sale of real estate, especially the first few paragraphs.

If the land is purchased without a housing unit on it, that property cannot be considered the principal residence until the year that a house is built and you move into it.

CRA usually considers that if there is more than 1/2 hectare (1.25 acres) of property, only 1/2 hectare of the land can be considered part of the principal residence, and there would be a capital gain on the excess when the property is sold, even if the rest is the principal residence.  However, they also consider whether the property is subdividable.  Thus, if the property is 2 hectares, and is not subdividable, they may consider the whole amount of the land to be part of the principal residence.

Tax tip:  Before making any real estate investments, downsizing or selling your home in London Ontario, make sure you know the tax consequences. Ask a professional.

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Ty Lacroix

"Not All Realtors Are The Same"! This website and content are for you and are designed and constantly upgraded with the latest real estate trends, how-tos, and what is for sale on MLS. Our primary focus is guiding home buyers and sellers to make good decisions. We believe selling real estate is a process, not an event or knee-jerk reaction; we sleep well at night and ensure our clients do as well! We are not for everybody, nor can we please everybody, nor do we tell people what they want to hear; I know that may be old-fashioned and boring, but we are dealing with hundreds of thousands of your hard-earned money. Would you rather be happy, excited and bored or unhappy, excited and make a poor choice? About Ty I am a Broker with Sutton Group Preferred Realty Inc., Brokerage and the team leader for The Envelope Real Estate Group, that's enough about me! You see, this is about you, you do not want to hear blah blah stuff about awards, designations, or that we walk older adults across the street (I used to help old ladies cross the street, but as I got older I did not want my wife to think I was flirting) the reincarnation of Mother Teresa, walk on water or anything else to impress you. We let the numbers speak for themselves; success leaves clues!

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