# Change or Rental Property to Primary Residence



## NR05 (Jun 20, 2011)

I've got a condo where I rent out one bedroom to a roomate. Over the last few years i've been claiming half of it as primary residence and half as an Income Property. I'm considering getting rid of the tenant and using the whole property as my primary residence. I know when i do this CRA will consider this a deemed disposition and it will be subject to capital gains. My question is can I use my MPAC property assement as the fair market value to calculate the capital gain?


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## MoneyGal (Apr 24, 2009)

Yes.


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## Westerly (Dec 26, 2010)

Yes, if it reflects the fair market value.

However, the bigger question is whether or not there is tax payable on the capital gain. Assuming no other principle residence, are you (and have you been) using the condo primarily for yourself? If you have a two bedroom condo and you are in the master bedroom, retain the parking stall and storage for yourself etc you are over 50% personal use and no tax is payable on the capital gain. Regardless that you may have reported it as 50% for simplicity, it is a question of fact.

Similarily someone renting out a suite in their basement would not ordinarily affect their PR exemption and would not ordinarily pay tax on capital gains on the suite portion.

If this is your principle residence I would not anticipate paying tax on a capital gain (but I would also not be claiming the rental expenses as 50% either.) If there is tax on the capital gain (which I doubt), it is / can be deferred until the actual sale - at which time a calculation is made to allocate the years of personal vs rental use and % of each.

There are so many factors and it depends on your circumstances, but is is highly unlikely that you have to pay capital gains on the deemed disposition. I would talk to an accountant before reporting it.


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## donaldmc (Feb 27, 2012)

Well, i think, yes you can definitely use it.


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## NR05 (Jun 20, 2011)

Westerly said:


> Yes, if it reflects the fair market value.
> 
> However, the bigger question is whether or not there is tax payable on the capital gain. Assuming no other principle residence, are you (and have you been) using the condo primarily for yourself? If you have a two bedroom condo and you are in the master bedroom, retain the parking stall and storage for yourself etc you are over 50% personal use and no tax is payable on the capital gain. Regardless that you may have reported it as 50% for simplicity, it is a question of fact.
> 
> ...


Thanks this is very interesting and something I wasn't aware of. If I choose not to claim rental expenses would that mean paying taxes on the full rent I collect?


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## Just a Guy (Mar 27, 2012)

Yes, basically you can't double dip. If you claim 50% of expenses as a write off, you'll pay CG on 50%, if you don't claim expenses, you don't pay CG, but you pay income tax.


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