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Mechanics of completing principal residence disposition


#1

I’ve completed the T2091 and the relevant section at the bottom of the S3. When I link the T2091 to the S3 lines 3 & 4 on the T2091 become blue, indicating that this information (years owned before/after 1982/1981) should be auto filling from somewhere else. Where???


#2

Line 3 of the T2091 is just the sum of what you entered on lines 1 and line 2. Lines 1 and 2 are the sum of the years you manually designated in part 1 of the T2091 (derived from a and b).

Once linked, line 4 of the T2091 is calculated using the “year of acquisition” you entered on the Schedule 3 in the Principal Residence Designation section. It is calculated as 1982 minus the year you entered as the year of acquisition. It will be zero unless the house was purchased in 1981 or earlier.

There is also a T2091WS worksheet, but I don’t think this is what you are asking about.


#3

Sorry - I meant lines 4 & 5 - line 5 is really the one I’m concerned about - is showing as zero. Property purchased and sold in 2016. Thinking it should be 1


#4

The reason you are not getting the expected result is because the house was purchased and sold in 2016. You don’t use the T2091. Box 5 on the T2091 would be calculated as 2016 - 2016 which equals zero.

You need to either tick box 1 in the Principal Residence Area of the Schedule 3 or you need to report in area 4 of Schedule 3. The house is either the client’s principal residence for the “year 2016” or it is not their principal residence at all… it can not be designated for a part year. There is a +1 rule in place that contemplates the sale of your principal residence and purchase of another in the same year.

Here are a couple of good links.

https://www.linkedin.com/pulse/principal-residence-dilemma-hugh-neilson-fcpa-fca-tep

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/rprtng-ncm/lns101-170/127/rsdnc/dspsng/menu-eng.html


#5

I’m well aware of the tax rules. It is being designated as the principal residence for 2016 - Taxcycle is calculating a gain even if I leave box 2 as zero (to match the 0 in box 5). I have ticked box one in the principal residence area of Schedule 3. Still a gain.

I’ll contact TaxCycle and see what they have to say.


#6

If you select box 1 you do not complete the T2091.

If you look a little closer at the Principle Residence area of the Schedule 3 you will see that only boxes 2 and 3 refer to the note about using T2091 to calculate the capital gain.


#7

Got it - that was the missing piece. Thought the T2091 was a necessary election

» Government Forms, Publications, and Rulings

» Income Tax Folios (CRA) 

  » Series 1 – Individuals 

    » Folio 3 – Family unit issues 

      » S1-F3-C2: Principal Residence 

2.15 According to section 2301 of the Regulations, a taxpayer’s designation of a property as a principal residence for one or more tax years is to be made in his or her income tax return for the tax year in which he or she has disposed of the property or granted an option to another person to acquire the property. Beginning with the 2016 tax year, taxpayers who sell their principal residence are required to report certain basic information with their tax return. Where the property is designated as a principal residence for all the years it was owned, the designation form for individuals (other than trusts) for the 2016 tax year is Schedule 3 of the T1 income tax and benefit return (which is revised for this purpose). The information required includes the address of the property, the date it was acquired and the amount of the proceeds of disposition. This reporting is necessary in order to claim the full principal residence exemption. Where the taxpayer designates the property as a principal residence for only some of the years it was owned, Form T2091(IND), Designation of a Property as a Principal Residence by an Individual (Other Than a Personal Trust), is the designation form for 2016, although Schedule 3 must be completed as well.