Question

Mr. Jerry Haggard owns a house in Calgary, as well as a cottage in Canmore. He
purchased the house in 2008 for s186.01
-,000. The cottage was purchased in 2011 for
$105,000. During December, 2019, both properties are sold, the house for s263,000
and the cottage for st97,000. He has lived in the Calgary house during the year, but
has spent his summers in the Canmore cottage. Determine the minimum capital gain
that he must report on the 2019 sale of the two properties. :

Answer 1

The gain on sale of taxpayer's principal/main residence is subject to $250,000 exclusion from gross income; excess gain over the applicable $ limit is taxable.

But to avail this exclusion ownership and use test must be met which states that;

1.Ownership test - Own the house for at least 2 out of the last 5 years.

2. Use requirement - Used the home as a principal residence for at least 2 years out of the last 5 years.

Mr Jerry owned both the houses for more than 5 years so ownership test has been met but he has lived in Calgary house during the year and in summers he stayed in the cottage.

So, it can be seen that Mr Jerry has lived in his Calgary house for most of the time after he has owned the house as compared to the cottage. Hence, it can be concluded that the Calgary house can be termed as Principal residence for Mr Jerry.

Particulars	Calgary house	Cottage
	$263,000	$197,000
	$186,000	$105,000
Capital gain	$77,000	$92,000
Less Homeowner's exclusion	$77,000	$ 0
Capital gain taxable for 2019	$  -	$ 92,000

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