My name is Mark Goodfield. Welcome to The Blunt Bean Counter ™, a blog that shares my thoughts on income taxes, finance and the psychology of money. I am a Chartered Professional Accountant and a partner with a National Accounting Firm in Toronto. This blog is meant for everyone, but in particular for high net worth individuals and owners of private corporations. The views and opinions expressed in this blog are written solely in my personal capacity and cannot be attributed to the accounting firm with which I am affiliated. My posts are blunt, opinionated and even have a twist of humor/sarcasm. You've been warned. Please note the blog posts are time sensitive and subject to changes in legislation or law.

Monday, June 18, 2018

The Taboo of Asking for Money Within a Family

In May of 2017, I noted that I had given up on writing a book on The Taboo of Money. In that post I noted I would be posting part of the second intended chapter on "Asking For Money: The Intergenerational Communication Gap". Today and next week I post an edited down version of this intended chapter.

Asking For Money: The Intergenerational Communication Gap


The Taboo!

Probably one of the most frowned upon money taboos is asking for money, whether as a loan or a gift. This can be a child asking a parent for money or surprising to some, a parent asking a child for money. This taboo can encompass everything from a child in an abusive marriage who is dependent upon the abusive spouse’s income and thus cannot leave the marriage, to a parent too proud to admit they do not have the necessary funds for retirement and are reverse mortgaging their house to survive.

Broaching the money taboo by the party in need requires a leap of faith that their family will not judge their current financial or living situation and not consider the request a money grab.

I have broken down this taboo into three categories, which will be explained in greater detail in the second post:

1. Need
2. Seed
3. Greed

Reasons for the Taboo

This taboo is all about our pride and possible embarrassment. Most of us are brought up to be self-sufficient and responsible for our own financial well-being. To ask for money is admitting we have failed at being self-sufficient, at least in the short-term. We may be embarrassed because we are asking a parent or a child for money, but in many circumstances, the issue that has caused the necessity to request money is embarrassing.

The reasons a child may ask a parent for money range from the fact they have lost their job, to they have a substance abuse or gambling problem, to they are involved in an abusive marriage, to they require money to start a business, to finally, they just want money to enjoy themselves.

A parent may need money because of poor retirement planning, physical or medical issues, elder abuse and economic situations beyond their control, such as the low interest environment we have faced for the last several years.

Some of the excuses I have heard for children not asking their parents for money include:

1. They will think me a complete failure.
2. My parents told me to get a profession as a fallback; now that my business has failed I don’t have a fallback. I will just be asking for a “told you so”.
3. My parents worked their whole life for what they have; I have no right to infringe upon their retirement earnings.
4. My parents will think I am just trying to “steal their money from them”.
5. My parent’s perception of me will be shattered.
6. The reason I need money is personal, I don’t really want to discuss it with my parents.
7. My father regaled me with stories of how he was given nothing from his parents and was self-made. He will not be able to understand that I am not from the same cut of cloth as he.

Some excuses I have heard for parents not asking their children for money (these have been few and far between):

1. I am my son’s/daughter’s role model, if I ask him/her for money he/she will think less of me.
2. I have told my children their whole life to not spend more than they earn and to save for retirement. How can I now ask them for money?
3. I can reverse mortgage my house and they will never know until I pass away that I had financial issues.
4. My children have their own job and family issues; I do not need to burden them with mine.
5. I lived through the war with very little; I can do it one more time.
6. I have lived to provide my children a better life than mine; I will not do anything that impacts that objective.

Next week I finish this discussion looking into why people may ask for money.

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation. Please note the blog post is time sensitive and subject to changes in legislation or law.

Monday, June 4, 2018

BDO Canada LLP Retirement Survey Report - More Financial Survey Results

You may remember my November post highlighting the initial results of a financial survey conducted by BDO Canada LLP. These findings offered a trove of valuable information on the wealth management journey for Canadian business owners. They confirmed much of what I had been hearing in conversation with clients but also offered important new insights.

The financial survey produced such robust data that BDO created two reports. The second one — The Retirement Planning Report — is now available as a free download and reveals additional insights on how all Canadians manage their wealth and plan for retirement.

The survey that produced these two reports has strong ties to The Blunt Bean Counter. Many of you took part in this study — thank you very much for your tremendous participation and input. Some of you received a free copy of my book Let’s Get Blunt About Your Financial Affairs as a token of thanks for responding to the questionnaire. In total, almost 1000 Canadians took part in the study.

Summer beckons from just around the corner. For those taking time away from the office, the break provides a great opportunity to reflect on the big picture: how we envision retirement, how our finances align with that vision, and where family fits into the picture.

This new BDO report will help you focus on what matters to you in retirement and on your preparedness. Jonathan Townsend, the National Wealth Advisory Services leader for BDO Canada LLP, provides a synopsis of the report in his guest post below.

In conjunction with the BDO report, you may want to read, re-read or reference the six-part series I had on "How Much Money do I Need to Retire? Heck if I Know or Anyone Else Does!" The links for the blog posts are down the right-hand side of this page under the Retirement heading.

Retirement Planning Report   By Jonathan Townsend


Retirement sometimes appears to Canadians as a moving target. Like all plans for the future, it depends on variables that we can’t fully control. We do our best to cover all the circumstances, but life intervenes and renders our financial plans out-of-date.

“How much do people actually need to save?” Mark Goodfield in the report says the following: “That is the million-dollar question — with no clear-cut answer. At the end of the day, Canadians need to evaluate their individual needs with the help of a trusted advisor.”

That is why expectations play such a large role in successful retirement planning. In the 1980s, many Canadians believed their investments would support retirement at 55. Today’s pre-retirees have adjusted their retirement dates upward to fit the changing times. The average age of retirement climbed from 61 in 2005 to 63 in 2015, according to Statistics Canada.

BDO’s new Retirement Planning Report reveals valuable data on a topic that can be difficult to access: how Canadians themselves see retirement. By turning the spotlight on expectations, we can better understand the entire planning process.

Here are some key report findings that caught my attention:

  • On preparedness — About half of survey respondents have prepared a financial plan. Of those respondents with a plan, almost three-quarters had a professional advisor prepare the plan.
  • On health care — Long-term health care placed second on the list of respondents’ retirement concerns, but almost 4 of 5 of respondents have done nothing to prepare for health care costs in retirement.
  • On family — Canadians in the so-called sandwich generation raise their children while looking after their parents. Fifteen percent of respondents in our study say they are supporting their parents financially. As longevity continues to increase, Canadians may need to calibrate their retirement plans to account for both slices of bread in the family sandwich. Rob Carrick of The Globe and Mail found this topic of interest, especially the fact that 10% of Canadians support both their parents and children and discussed the study here in his Carrick on Money newsletter.
  • On pension plans — Companies have shifted more of the savings burden to employees by moving to defined contribution plans. In the longer term, more and more Canadians may have no employer-sponsored plan at all. Contract and part-time work are accounting for a larger share of the labour market.
The findings and strategies highlighted in the report provide actionable tips that you can incorporate into your own successful planning. I invite you to download the report here.

Jonathan Townsend is the National Wealth Advisory Leader at BDO Canada LLP. If you have any questions, please contact him at 519-432-5534 or jtownsend@bdo.ca.

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation. Please note the blog post is time sensitive and subject to changes in legislation or law.

Monday, May 28, 2018

Post Tax Season Assessment and Filing Issues

This year I have had multiple client queries in respect to their Notice of Assessments (“NOAs”) which reflect tax balances owing, despite the fact the taxes were paid in April. Today I discuss this matter and a couple other issues, that have arisen after April 30th.


Notice of Assessments


Typically, taxpayers file their personal tax returns, pay their tax owing (or wait for their refund), start golfing and gardening and probably don’t give much more attention to their taxes until they receive their NOA. Upon receipt, they may take a quick glance to ensure no tax is owing, maybe make note of their RRSP contribution limit and then throw the NOA into a file.

This year, many taxpayers have done a double-take when reviewing their NOA, since their assessments are reflecting tax still owing. I have had a several clients call me in a panic asking if their return was incorrectly filed since the CRA has assessed them more tax? I quickly put their minds at ease. I tell them that what has happened is the CRA is moving to “express” NOAs and has issued the notice so quickly that their system has not yet had time to match the tax payment (this applies more specifically to people who pay their balance owing at the same time or within days of  filing their return). I would bet that many of you who owed tax this year had the same issue with your NOAs.

While the NOA expediency is impressive, they are actually being issued too fast (imagine that, complaining the CRA is too fast :) and are leading to some confusion. Perhaps the CRA should consider waiting a little longer to issue NOAs, so that for those people who pay their tax owing right away, the payment can be reflected, such that the NOA will not reflect a balance outstanding, where there is in fact, no tax due.

The assessment wording has also caused some confusion for those taxpayers who have filed T1135 Foreign Income Reporting Forms. The NOA states that if you indicated you owned foreign property, you have to fill out Form T1135 and send it to them if not already done so. Several of my clients have called to ask if we forgot to send in their T1135, when in fact, the NOA is just reminding people that if they said yes, they had to file the T1135.

Alimony


I have also had a couple clients who pay alimony receive NOAs that have reduced their alimony claim. The NOA says the agreement the CRA has on hand shows they are not entitled to the alimony deduction claimed. It is a little unclear at this time whether this is just an issue where agreements have been amended to change alimony and the CRA has not been provided the new agreements, or the CRA is factoring in non-deductible child support to reduce the alimony claim. In any event, I think both the CRA and taxpayers would be best served if where an alimony claim is made that differs from the CRA records, the CRA does not issue a NOA, but sends an information request asking the taxpayer to explain the variance and support the claim. This would save a lot of time and frustration on both the taxpayer and CRA side and reduce a number of T1 Adjustment Requests and Notice of Objections.

Information Requests


Finally, just a reminder: if you receive an information request to provide the CRA back-up for any expense or claim you made on your return, you typically have 30 days to respond. Either do so within the 30 day time period, or request an extension far in advance. Do not ignore the information request or your return will be assessed without the deduction or expense.

Hopefully you had a refund in 2017 and have not had to deal with any of the above concerns.

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation. Please note the blog post is time sensitive and subject to changes in legislation or law.

Monday, May 21, 2018

How the Principal Residence Exemption Works When You Construct a New Home

Several provinces have experienced booming real estate markets the last few years and some people have used the increased equity in their home to buy land and construct their dream home. In some cases, people sell their current home and rent until the new home is ready to occupy, while others continue to own and live in their present home and then sell it before they move into their new home.

In both these situations, people are often surprised at how the Principal Residence Exemption (“PRE”) must be calculated. Today, I will review what the possible tax consequences are under these scenarios.

Construction of a Home on Vacant Land


Where you acquire vacant land for the purpose of constructing a home for you and your family in a future year, the property cannot be designated as your principal residence until you and your family commence to ordinarily inhabit the newly constructed home.

Consequently, if the newly constructed home goes up significantly in value prior to you moving in, those years while the home was under construction may be problematic for purposes of the PRE. I review the details below.

The Principal Residence Exemption

As you may be aware, the PRE is a formulaic calculation that determines the amount of the gain on the sale of your principal residence that is exempt. I set forth the formula below:

The capital gain on the sale of your home multiplied by:

The number of years you have lived in your home & designated the property as your PR, plus 1 divided by the number of years you have owned the property

The one-year bonus is meant to ensure that you are not penalized when you move from one home to another in the same year. Thus, where you live in your home the entire time you owned it, you are typically not subject to tax on the sale of the home (don’t forget, you are now required to report the sale of your principal residence on your personal income tax return as I detailed in this recent blog post titled Reporting the Sale of Your Principal Residence). 

Income Tax Folio S1-F3-C2 Principal Residence


Income tax folio S1-F3-C2 sets forth a great example of how the PRE works where you have constructed a new home. The example (2.29) is as follows:

“In 2002, Mr. A acquired vacant land for $50,000. In 2005, he constructed a housing unit on the land, costing $200,000, and started to ordinarily inhabit the housing unit. In 2011, he disposed of the property for $300,000. Mr. A’s gain otherwise determined on the disposition of the property is equal to his $300,000 proceeds minus his $250,000 adjusted cost base = $50,000 (assume there were no costs of disposition). Mr. A can designate the property as his principal residence for the years 2005 to 2011 inclusive, but not for the years 2002 to 2004 inclusive because no one lived in a housing unit on the property during those years. The principal residence exemption formula cannot, therefore, eliminate his entire $50,000 gain otherwise determined, but rather can eliminate only $40,000 of that gain, as shown in the following:

Applying the formula A × (B ÷ C):

A is $50,000

B is 1 + 7 (being tax years 2005 to 2011)

C is 10 (being tax years 2002 to 2011)

= $50,000 x (8 ÷ 10)

= $40,000”

How the Principal Residence Exemption Works When You Continue to Own Your Current Home While You are Constructing a New Home


So, what the heck happens when you have a home and build a new one? Essentially two things:

1. As noted in the CRA example above, for the years you did not ordinarily inhabit the new home while it was under construction you will at most only be able to protect one year of those years you did not inhabit the home from being taxable when you eventually sell.

2. If your old home had a yearly gain smaller than the yearly gain on the home under construction before you move in, you cannot save (not designate) those years with the larger gain on the newly constructed home.

What this means is the following. Typically, you would suspect the result would be similar to where you owned say a home and a cottage. In those circumstances (since you ordinary inhabit both properties) where you sell your home, if your home went up $5,000 a year in value and your cottage for example went up $25,000 a year, you would likely not designate all the years to your home, since you would want to save as many years as possible of your PRE exemption for when you sell the cottage (since you would be saving $25k a year versus $5k a year) and pay some tax on the sale of your home.

However, where you had a home under construction for say three years that goes up in value $25,000 per year, you will not have the option to not designate all three years on your home sale and you can at best only protect one year, because you did not ordinarily inhabit the home under construction. Yes, I know, clear as mud.

Clearly this is a very fact specific situation, but the income tax result is often an unexpected tax hit. In any case, I strongly suggest you obtain income tax advice if you are in this situation, since it is obviously extremely complex.

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation. Please note the blog post is time sensitive and subject to changes in legislation or law.

Monday, May 14, 2018

Terminal Income Tax Return Planning – Capital Gains and Losses

Today, I am going to discuss tax planning in respect of capital gains and losses on the final tax return (“terminal return”) of a deceased person. While a slightly morbid topic, many of you likely have been named as an executor in your parents, siblings or friends wills and today's discussion will provide you some basic understanding of one of the more important issues when filing a terminal return.

General Rules


When a person passes away, they are deemed under the Income Tax Act (“Act”), to have disposed of their capital property immediately prior to their death. In English, this means you are taxed as if you sold all your capital property the moment before you died and thus, your estate must recognize any capital gains or losses caused by this phantom disposition. For example, say a person had 100 shares of ABC Co. which they bought at $10 in 2010 and at their date of death, the stock was trading at $18. They would have a deemed capital gain of $800 ($18-10 x 100 shares) even though they never had sold the stock before they passed away.

The most typical examples of capital property are stocks, cottages and rental properties (I have assumed the real estate is capital property and not inventory, which it could be if your business is real estate development).

There is one main exception to the deemed disposition rule. Where you are married or live common law and have left your property to your spouse, there is an automatic spousal rollover such that these assets can be transferred to your surviving spouse with no immediate tax consequences and the deemed disposition can be deferred until the death of the surviving spouse.

The rest of this discussion involves planning where the deceased person has a spouse. If this is not the case in your particular circumstance, you can stop reading unless you want some general knowledge or will be an executor in the future.

Electing Out of The Automatic Spousal Rollover


The Act contains an interesting provision that allows a person’s legal representative to elect out of the automatic spousal rollover noted above. The election which is done on a property-by-property (or share by share) basis is typically undertaken for the following two reasons.

1. To trigger capital gains

2. To trigger capital losses

Triggering Capital Gains


You may wish to trigger a capital gain for the reasons I list below:

1. The deceased person is in a low-income tax bracket and by triggering capital gains, you utilize their marginal tax rates.

2. The deceased person was a small business owner and their shares are eligible for the Qualifying Small Business Corporation tax exemption of $848,252.

3. The deceased person had capital losses or non-capital losses that would be “lost” if you do not trigger additional income (be careful with this one, as per #2 below, the capital losses can be deducted against income in the year of death in certain circumstances, so don't waste them).

4. The deceased person has donation or medical credits that will not be utilized without additional income being generated.

It is important to note, not only is the election beneficial for the reasons listed above, but there is a significant additional benefit. Where you elect to trigger a capital gain, the cost base of the capital property to the surviving spouse is increased to the fair market value of the property elected on. So, for example, if an executor elected out of the automatic spousal rollover on the 100 shares of ABC Co. the adjusted cost base of the shares to the surviving spouse would now be $1,800 (100 shares x $18 market value at death) instead of $1,000

Triggering Capital Losses


Although slightly counter intuitive, a legal representative may wish to trigger a capital loss. There are two reasons for this:

1. Any net capital loss triggered can be carried back against capital gains reported in the prior 3 years.

2. The representative can also choose to apply the capital losses against any other income on the terminal return and the preceding year. This means the capital loss can be applied against not only capital gains, but regular income if the capital losses are greater than any capital gains on the terminal return and prior years return. The one constraint is that if the deceased had claimed their capital gains exemption in prior years, the loss carryback is reduced by the prior capital gains exemption claim and may wipe out the benefit of option #2.

Tax planning for a terminal tax return is very complicated and I have simplified the above for purposes of discussion. If you are an executor for a will, I strongly urge you to seek professional advice to guide and assist you through the various tax implications and options.

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation. Please note the blog post is time sensitive and subject to changes in legislation or law.

Monday, April 16, 2018

Confessions of a Tax Season Accountant - Determining the Adjusted Cost Base of Your U.S.Securities

Last week I received an avalanche of tax returns, as my clients finally received their T3 and T5013 tax slips (although many are now being amended). Driving to work to prepare all these returns was problematic, as the weather in Toronto was terrible. While snow in April is not what you hope for, the upside for an accountant is; my friends cannot call me on each hole of the golf course to torment me while I am working away doing tax returns. But I digress.

While preparing returns last week, I only found one noteworthy issue to discuss; that being the tracking of the adjusted cost base of U.S. stocks and securities. This issue rears its ugly head when filing terminal tax returns (the final return in the year of death) and for anyone who sells U.S. stocks and receives a capital gain/loss report solely in U.S. dollars.

What is the Adjusted Cost Basis of Your U.S. Securities? Your Guess is as Good as Mine

Unfortunately, over the past 15 months or so, I had a couple clients pass away. As discussed in this blog post, when you die, there is a deemed disposition of the capital property you own on death (unless you have a surviving spouse to whom you transfer your property under your will, although you can elect out of  this provision on a security by security basis). My issue has been obtaining the historical purchase dates of the U.S. stocks to determine the deemed disposition gain for these client's U.S. stock holdings.
For example. Say a client purchased IBM at $40 in their U.S. portfolio years ago when the exchange rate was say $1.05. The converted Canadian cost base is $42 ($40x1.05). Let’s assume the stock price upon the date of their death was $150. If the exchange rate on death is $1.30, the deemed proceeds are $195, and the capital gain should be $153 ($195-42).

However, in two cases where I had a client pass away, all I was provided with from the investment manager/institution was a U.S. cost base of $40 and a U.S. fair market value of $150. If I just convert both the $40 cost and $150 value at death at say $1.30, this would result in a capital gain of $143 instead of the correct $153. Where the U.S. stocks have been purchased with the current advisor, typically they can at least provide me with the purchase dates and sometimes they can run a new report with the converted $Cdn ACB. Where stocks were initially purchased by the client on their own or with another advisor, it is almost impossible to get the original purchase date unless the executor can find the original purchase documents.

The standard reasoning provided by reporting entities for not having this information is that the stocks were transferred to them and they don’t have the historical cost. I can live with that explanation, but query why when U.S. stocks are purchased by the manager or institution, they do not in many cases automatically track and convert to a $Cdn ACB? Another of life’s little tax mysteries.

Often I must play detective and try to somehow determine when these stocks were purchased which is either extremely time consuming or not possible given the lack of records.

Many of you may have this same issue if you have a U.S. stock portfolio with an investment advisor or financial institution and your yearly realized report is provided only in U.S. dollars. How do you know what your adjusted $Cdn cost base is? I suggest that in order to alleviate this problem, you ask your advisor to provide you on an annual basis with the $Cdn adjusted cost base of your U.S. stocks whether they have to push a button or have their assistant do it on a spreadsheet. You pay for this. If you are a DIY investor, you should ensure you note the foreign exchange date down for every U.S. or foreign stock purchase.

Long story short, this a significant reporting issue while you are alive and after you pass away.

Note: I am sorry, but I do not answer questions in late April due to my workload, so the comments option has been turned off. Thus, you cannot comment on this post and past comments on other blog posts will not appear until I turn the comment function back on.

This is my last post (although I may post a guest blog) for a couple weeks, so see you in May.


This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation. Please note the blog post is time sensitive and subject to changes in legislation or law.

Monday, April 9, 2018

Confessions of a Tax Season Accountant - Late T-slips and Reporting the Sale of Your Principal Residence

In today's tax season confession, I will provide an update on the required reporting when you sell your principal residence. I also include my annual rant, about the fact many of my clients must wait until late March or early April to receive their final T-slips.

Condensed Tax Season


Just to be consistent with the prior 7 years, I will again complain about the condensed nature of tax season. I receive about 65% of my clients returns after March 31st, causing a crazy April. The delay is typically caused by clients waiting for their T3 and T5013 tax slips (you would not believe the amount of emails and faxes I received last week with just arrived T3's and T5013's). I ponder why, with current technology, that all filing deadlines for T4’s, T5’s, T3’s and T5013’s cannot be moved up by 15-30 days, so everyone has adequate time to file their tax returns. I guess this is one of life’s little mysteries.

Principal Residence Exemption Rules


As discussed in this October 2016 blog post on the new Principal Residence (“PR”) reporting requirements, you must now report the sale of your PR (typically your house but can also be your cottage) on your tax return.

For 2016, you just had to report the sale on schedule 3, unless the gain was not fully exempt, in which case you had to file Form T2091 (IND) Designation of a Property as a Principal Residence by an Individual (Other Than a Personal Trust). However, for 2017 and any future years, you must now file schedule 3 and Form T2091 in all cases.

If you designate your home/cottage as your PR for all the years you owned it on schedule 3 (box 1), other than the free plus 1 year, (you may recall the formula to determine the exempt portion on the sale of your PR is the capital gain on the sale of your PR, times the ratio of the number of years you have lived in your home [i.e. designated the home as your principal residence] plus 1, divided by the number of years you have owned the property) the form is fairly simple to complete. You just need to fill out the first page of the T2091 form. You will need to include the following information:

  • the year of acquisition of the property you sold
  • the proceeds of disposition 
  • the address of the property being designated as a principal residence 
  • the years you owned the property and are designating as your principal residence.

Penalty


There are stiff penalties for not filing the PR designation on time. New paragraph 220(3.21)(a.1) will allow for late-filed forms subject to certain time restrictions. The penalty will be the lesser of the following amounts:

  • $8,000; and
  • $100 for each complete month from the original due date of the relevant income tax return to the date that your request for a late-filed designation is made in a form satisfactory to the CRA.

The CRA says on their website that a penalty may apply where the PR election is late-filed. I would work on the assumption the penalty is applicable and you will need the CRA to be merciful to have the penalty removed.

It is also important to note that if you do not file the T2091 form, your return can be re-assessed at any time. This means the usual statue barred period of 3 years is not applicable and your return remains open until the end of time or three years from when your return is assessed, when you finally file the form.

If you sold your principal residence in 2017, simply put, complete schedule 3 and file Form T2091, or there may be punitive repercussions.

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation. Please note the blog post is time sensitive and subject to changes in legislation or law.