# Principal Residence Election



## Grumpy (Apr 25, 2011)

A family member owns both a home and a cottage. It is to his benefit to use the principal residence election (PRE) to exempt the capital gain on the cottage on disposition of the properties. With one possible exception, the cottage property meets the eligibility requirements in all other respects. The CRA states that a PRE does not need to be made until disposition, but also requires that no other property was designated as principal residence for a particular year.

The potential issue is that he has been claiming the property taxes on his home for purposes of the Ontario property tax credit (ON-BEN). Claiming this credit includes making a declaration of principal residence and he has listed the home, instead of the cottage as he probably should have. 

Does this Ontario property tax credit declaration mean that he has designated the home as principal residence for capital gains purposes for the years in which this declaration was made, or is he still able to designate the cottage as principal residence at the time of disposition?

If he has negated his ability to use the PRE on his cottage, can he change this declaration for the previous 10 years at least by filing amended returns?


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## kcowan (Jul 1, 2010)

I think he would have to pay capital gains on the cottage. I assume he does not have wife?


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## Grumpy (Apr 25, 2011)

Thank you for responding.

Actually, I've had responses from a few sources now indicating that claiming the Ontario Property Tax Credit will have no detrimental effect on the ability to designate the cottage as a principal residence and does not mean that the individual has thereby designated his house for purposes of the principal residence exemption. 

For others who may have a house and a cottage, you should consider designating the cottage as principal residence to shield the gain where it is larger than on the house. The cottage may qualify even if it is only occupied on a seasonal basis, even if only on weekends. There are a number of requirements, outlined in the bulletin found at the following link:

http://www.cra-arc.gc.ca/E/pub/tp/it120r6/it120r6-e.pdf

The basics are also laid out very well in the following articles:

http://dir.rbcinvestments.com//pict...richetti/principal residence - the basics.pdf

http://dir.rbcinvestments.com/pictu...lon/vacation property succession planning.pdf

http://www.inksterchristie.ca/PDF/wealth/cottagesuccessionplanning.pdf

Happy succession planning!


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