It has been a longstanding administrative position with the Canada Revenue Agency, that you did not have to report the sale of your principal residence on your personal tax return if it was covered by the principal residence exemption for all the years you owned it.
This has now changed! On October 3rd, 2016, Finance Minister, Bill Morneau introduced new rules to tighten up mortgage lending and deal with some issues with foreign home buyers. However along with these, a change was also put through, that starting in 2016, now requires you to report the sale of your principal residence on your personal tax return in the year of sale. It will still be tax free if covered by your principal residence exemption, but will give the CRA more information to combat perceived "home flipping" in the current hot real estate market and likely reduce unreported taxable sales of homes and cottages.
This is a significant change in that if this is not reported, it may effect your principal residence exemption when trying to use it in the future on another sale, and the CRA can now go back and assess non reporting penalties if you do not report the sale of you principal residence starting in 2016.
From the CRA's information released on this change - "You will complete Schedule 3 and file it with your T1 Income Tax and Benefit Return for the year you sell the property. If the property was your principal residence for every year that you owned it, you will make the principal residence designation in your Schedule 3. In this case, the year of acquisition, proceeds of disposition and the description of the property are the information that will have to be reported. Schedule 3 will be modified accordingly. Form T2091 (or Form T1255) will still be required for the designation in the case the property was not your principal residence for all of the years that you owned it.
So you will now want to ensure that the disposition of your home, including information on when it was purchased and proceeds of sale, is reported or it may haunt you down the road.
Martin Kretzschmann CPA CA. Partner at Brabant & Kretzschmann, Chartered Professional Accountants
BRABANT + KRETZSCHMANN
Chartered Professional Accountants
373 Midland Ave
Midland Ontario L4R 3K8