On October 3, 2016, the CRA announced a requirement to report the sale of principal residence by a taxpayer. Previously, if the property was a taxpayer’s principal residence for every year of ownership, they would receive the principal residence exemption and would not be required to report the sale on their income tax return. The principal residence exemption allows a taxpayer relief from paying taxes on the gain from the sale of their principal residence.
Commencing tax year 2016, if you disposed of a property for which you want to claim the principal residence exemption, you will have to report the following details on your income tax return to be able to claim the principal residence exemption:
1. Date of acquisition,
2. Proceeds of disposition, and
3. Description of the property
You will be required to report the property even if it was not your principal residence for some of the years you owned it. The CRA will not allow you to claim the principal residence exemption if you do not report the sale on your income tax return. If you forget to report as such, the CRA will allow a late designation, but a penalty may apply as follows:
The lesser of the following amounts:
1. $8,000; or
2. $100 for each month after the original due date of the tax return for the year of disposition.