# Capital gains tax liability?



## domurtag (Jun 30, 2013)

Hi,

I bought a condo in Montreal about 6 years ago. I lived in it myself for 3 years, then rented it for 3 years. The market value of the property is now about $150K more than what I paid for it. If I were to sell the place now, would these capital gains be subject to taxation because the condo wasn't my primary residence for the entire duration of my ownership?

Thanks in advance


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## FrugalTrader (Oct 13, 2008)

The capital gains would be the difference between the current value of the condo and the value when the unit began as a rental property.


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## domurtag (Jun 30, 2013)

*eybbell 1688*



FrugalTrader said:


> The capital gains would be the difference between the current value of the condo and the value when the unit began as a rental property.


My question wasn't "what is capital gains tax"? It was, am I liable to pay capital gains tax if I sell my condo, because I only used it as my primary residence for 3 of the 6 years that I've owned it for.


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## domurtag (Jun 30, 2013)

*continued UsedTre*



FrugalTrader said:


> The capital gains would be the difference between the current value of the condo and the value when the unit began as a rental property.


Do you know at what rate these capital gains would be taxed? Would it be treated (for the purpose of taxation) like any other form of income? Also, how are these capital gains taxes collected, is the amount withheld by the notary or is it your own responsibility to declare and pay them in your annual tax filing?


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## FrugalTrader (Oct 13, 2008)

I answered your question, and yes you would owe capital gains tax. Basically 50% of the capital gains would be added to your income when you file income taxes, so you may end up paying in this year.


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## MoneyGal (Apr 24, 2009)

You need to know/calculate the value of the condo when you converted it from your principal residence to an income-earning property. 

Let's say you paid $250K and it is now worth $400K, and let's say that when you moved out/moved a tenant in, it was worth $300K. 

Using that example, your total capital gains on the sale of the condo would be $150K ($400-$250K). $50K of those gains would be non-taxable, as they are shielded by the principal residence exemptions. $100K of the gains would be added to your taxable income for the year of sale at the "inclusion rate" of 50% (that means you report $100K, but only $50K is taxable). 

Then, you would pay tax on the $50K of capital gains income at whatever your marginal rate is. That is, you'd add $50K to your income and essentially pay tax as if you'd earned $50K of employment income.


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## kcowan (Jul 1, 2010)

The reporting process is totally up to you. The notary/lawyer does nothing. It is due the year you receive the proceeds from the sale. I did this with a cottage that I inherited in Ontario.

Don't forget to recapture any depreciation you may have claimed and all costs you have incurred in renting and subsequent sale. It has to be consistent with how you claimed the rent as income.


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## w0nger (Mar 15, 2010)

get in the habit of having your property appraised as soon as it turns into an income producing property, then you'll have a solid number for CRA and yourself to calculate capital gains.


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## cardhu (May 26, 2009)

Where have you been living in the 3 years since you moved out of the condo? It is possible that the entire 6 year period since you bought it could be covered by the principal residence exemption, in which case you would not owe any tax on your gain at all.


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## domurtag (Jun 30, 2013)

cardhu said:


> Where have you been living in the 3 years since you moved out of the condo? It is possible that the entire 6 year period since you bought it could be covered by the principal residence exemption, in which case you would not owe any tax on your gain at all.


I have been living in rented accommodation in Ireland, France and Germany in the 3 years since I moved out of the condo. Do you know if this means the entire 6 year period since I bought the condo would be covered by the principal residence exemption?


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## OhGreatGuru (May 24, 2009)

_Do you know if this means the entire 6 year period since I bought the condo would be covered by the principal residence exemption?_
Can't say for certain on the limited information we have, but I think it unlikely. Cardhu was likely thinking of an exception in the rules that allows you to continue treating a rental property as a principal residence for up to 4 yrs (even longer under special circumstances) provided you have not claimed Capital Cost Allowance for the period that it was a rental. This is described in Chapter 6 of CRA - T4037 and IT120R6, Sections 28 & 29. However, according to IT120, you must have been a resident or deemed resident for tax purposes during the rental years in order to claim this.

Depending on how well you have been keeping your books and tax reporting for your rental, you may need to seek professional advice on how to report this.


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## Arshes76 (Jul 5, 2013)

I think you may find your answer here http://www.mnp.ca/en/media-centre/b...ur-principal-residence-into-a-rental-property


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