On page 2 of Schedule 3 of the return for the year of disposition of a principal residence, the individual checks the box for Case 1. By virtue of this effectively being a designation for all the years during which the taxpayer was owner, this could result in wasting the extra year under the “+1” computation.
- Is CRA prepared to treat this as a designation for all the years of holding minus one (for example, 2017 being the year of sale)?
- What evidence must the individual maintain for the event that there is a disposition of a second property that could be designated as a principal residence for 2017?
CRA responded:
Where a taxpayer owns only one property and designates it as his or her principal residence for all years in which he or she owned the property, the taxpayer must check Box 1.
Where an individual sells the only principal residence owned by the individual (House A) and acquires a new principal residence in the same year (House B), the CRA is of the view that Box 1 may be checked to designate House A as the individual’s principal residence for all years (or for all years less one year). In this situation, the CRA will not require Form T20911 to be completed with the individuals’ income tax return for the year. …
A written copy of the individual’s election should be retained for future reference… .