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Financial Feature

Millards Professional Chartered Accountants

Change in use of a property

Nina Nguyen CPA, CA. Senior Accountant

When there is a change in use of a Millards Professional Chartered Accountants, Brantford.
property, there could be a deemed
disposition resulting in a capital gain. Designation of a Property as a Principal Rental property to principal
A change in use could mean you changed Residence by an Individual, to claim the PRE.
your principal residence to a rental property residence
or from a rental property to your principal Election 45(2) If you turn your rental property into your
residence. The deemed disposition would be You can file an election under subsection principal residence, you will need to report
considered at its fair market value (FMV), 45(2), which will defer the recognition the capital gain on the deemed disposition
which could be determined by getting an of the deemed disposition until you sell on your tax return. However, you can defer
appraisal for the property. You would then be the property. This allows you to claim the the capital gain until you sell the property by
considered to have reacquired it at the FMV. PRE for up to four years, even though filing an election under subsection 45(3).
the property is no longer your principal Election 45(3)
Principal residence to rental residence. For the election to be valid, you
property have to record the rental income on your This election allows you to claim the PRE for
up to four years, even if you haven’t lived in
When you turn your principal residence to tax return, and no capital cost allowance the property yet. If you claimed CCA on the
a rental property, the capital gain needs (CCA) can be claimed. Please note that the property when it was a rental property, you
to be reported on your tax return for the PRE is only allowed to be claimed on one cannot file this election.
deemed disposition. However, the principal property per year. So if you have a new
residence exemption (PRE) can be claimed principal residence property and the change For further information please do not hesitate
for the years it was your principal residence, in use rental property, the PRE could only be to contact us at Millards at (519)759-3511 or
and the tax on the gain will be exempted. claimed on one of the property. visit us at www.millards.com
You will then need to file the T2091 form,

Learn more at brantfordbrantchamber.com/discount-partners

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