# Principal Residence Exemption Question



## OntMan (Mar 25, 2016)

If a senior who can no longer live by them self in a house that they occupied for 30 years, moves out the house to a nursing home, but decides not to sell the house right away and keeps it for 4 or 5 years before selling, does the Principal Residence Exemption apply for all of this time?
ie is the house still considered their principal residence(not the nursing home)?
or will a capital gain be triggered for some of those years or even for the full 30 + 5 years?

The house would either be rented out or some distant family member may occupy it, but the senior would never move back into the house.


----------



## RCB (Jan 11, 2014)

It is no longer the principal residence, the nursing home is. Financial compensation/benefit the person receives will be considered rental income, taxed at their marginal rate. This would include situations such as if a family member moved in, and paid only the property taxes on the senior's behalf.

Get an appraiser (not real estate agent) to appraise the house for it's value at the time the tenant moves in (the time the use changes). Future capital gains/losses begin with that value, at the time the use (personal to rental) changes. Values before that do not come into play for tax purposes.


----------



## nobleea (Oct 11, 2013)

I think there's some odd rule that allows you to defer principal residence change for up to 6 (?) years? Something like you were tryign to sell it, but couldn't due to the market. Seemed odd to me, but someone posted a CRA link on this.

Otherwise, they'll pay capital gains tax on the gains from when it became a rental to when it sells.


----------



## bgc_fan (Apr 5, 2009)

Here is a CRA link: Changing all your principal residence to a rental or business property

I believe the idea behind it is if you had to move away temporarily for employment, but intend on moving back. It can be deferred for 4 years assuming you still use that address for the principal residence.


----------



## Davis (Nov 11, 2014)

I had a discussion recently with a real estate lawyer about a similar situation. he said that in our case, because the senior has been out for about a year (after a 50-year stay in the house), and we used the house for some family events during the year involving the senior, he would be comfortable presenting it as the principal residence -- being maintained while the senior decided where to live. If we left it longer, he said we could be creating the appearance that we were holding on to it to increase the capital gain, so CRA might want to tax a portion.

At some point, it must be clear that the senior is not moving back. Six years sounds like a very long time.


----------

