Commencing in 2016, an individual who had disposed of a principal residence was required to indicate particulars on page 2 of Schedule 3 and, where a particular case was ticked off, complete a Form 2091. For 2016 dispositions, CRA would accept a late designation, and without a penalty being imposed except in the most excessive cases. An individual who disposed of the individual’s sole residence in 2016 may have neglected to report it due to lack of familiarity with the new rules or simply did not advise the individual’s accountant of the sale.
- In such cases, must the individual now amend the individual’s 2016 income tax return in order to provide the particulars requested on page 2 of Schedule 3?
- If an amendment is required, will no penalty be imposed for the late making of the principal residence designation respecting a 2016 disposition where this is not a serious case?
CRA responded:
[F]or the 2016 and subsequent years, ... taxpayers who have failed to report the disposition of their principal residence [are required to] amend their income tax return … .
For the sale of a residence in 2016, Schedule 3 … must be completed, on which must be stated the year of disposition of the property, its proceeds of disposition as well as its description. … Form T2091 … (or Form T1255 …), is required for the designation if the property was not the taxpayer's principal residence for all the years in which the taxpayer was the owner.
For dispositions in 2017 and subsequent years … taxpayers will also be required to complete Form T2091 (IND) (or Form T1255). If the sold property was the taxpayer's principal residence for all years, or for all but one year, while the taxpayer was its owner, the taxpayer is only required to complete the first page of Form T2091 (IND) (or Form T1255).
[T]he administrative practice stated on the CRA's website, allowing the reduction of the penalty for late-filing a principal residence designation, except in the most excessive cases, has been extended to dispositions that occurred in the 2017 taxation year.