A family member owns both a home and a cottage. It is to his benefit to use the principal residence election (PRE) to exempt the capital gain on the cottage on disposition of the properties. With one possible exception, the cottage property meets the eligibility requirements in all other respects. The CRA states that a PRE does not need to be made until disposition, but there is a further requirement that no other property was designated as principal residence for a particular year.
The potential issue is that he has been claiming the property taxes on his home for purposes of the Ontario property tax credit (ON-BEN). Claiming this credit includes making a declaration of principal residence and he has listed the home, instead of the cottage as he probably should have.
Does this Ontario property tax credit declaration mean that he has designated the home as principal residence for capital gains purposes for the years in which this declaration was made, or is he still able to designate the cottage as principal residence at the time of disposition?
If he has negated his ability to use the PRE on his cottage, can he change this declaration for the previous 10 years at least by filing amended returns?
Principal Residence Election
Moderator: Mark T Serbinski CA CPA