When a rental property is converted into a principal residence, are there any tax implications?
Allan Madan, CA
When there is change in use of real estate (ex. from income-producing to personal-use), a deemed disposition occurs at fair market value (FMV). This can result in a capital gain (i.e. FMV less Adjusted Cost Base). However, in certain situations, an election under subsection 45(3) can be made to defer the capital gain by reporting the disposition of the property when the property is actually sold.
For more information regarding this election, read CRA Guide T4037 Capital Gains.
Disclaimer
The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.
ABOUT THE AUTHOR
ALLAN MADAN
CA.CPA.CGA
Allan Madan is a CPA, CA and the founder of Madan Chartered Accountant Professional Corporation. Allan provides valuable tax planning, accounting and income tax preparation services in the Greater Toronto Area.
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