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1. Couple left Canada permanently to go back to our home country in March, 2021.
Had a Principal Residence which we bought Joint ownersip in 2000. We always lived there, was our Principal Residence through out.No other house but that.
2. FMV of our house was $ 1 Million in March 2021. We bought the house for $ 220,000 in 2000.
3. Never filed a Departure tax return in Canada for both of us when we left.
4. Did not get a Compliance Certificate etc when we left. We sold the house for $1.15 Million in August, 2022 from our overseas country. We were non resident then. Did not tell CRA. We also bought s house in our home country in July, 2021 and been living there since. Left Canada in March, 2021.
5. So Capital Gains is $ 150,000/- . Do we split the Capital Gains amongst the 2 of us as it is Joint ownership? So $ 75,000 each is added to our income for Year 2022?
6. Showed the Canadian house as Principal Residence on our 2022 tax return. And filed as a Resident even though we were non resident. Can we show that Canadian house as a Principal Residence in August 2022, although we lived abroad and bought a house abroad in July, 2021.
7. Do we get Principal Residence Exemption on the sale of our Canadian house?
8. I believe for about 1.5 year we will have to pay Capital Gains tax on it. The year we left Canada so FMV on that day and the year we sold the house as a non resident.
Summary:
1. Bought Canadian house in year 2000 for $ 220,000 Joint Ownership. Husband &
Wife.
2. Left Canada permanently on March, 2021. Did not file a Departure return. FMV of house was $ 1 Million on the day we left.House was our Principal Residence all these years.
3. Bought a new house in our home country for $ 400,000 in July, 2021. Canadian house in Canada was still there unsold.
4. Sold out house in Canada for $1.15 Million in August, 2022 from abroad. As a resident, even though we were non resident
5. Been filing tax return in Canada as a Resident since April, 2021 till today April, 2025 although we left in April, 2021.
6. No departure tax was paid, No Emigrant return was filed , No Deemed Disposition etc was shown. Although Principal Residence sale was shown on 2022 tax return.
7. Besides a Savings Bank Account in Canada we have had no other stocks, shares, Mutual Funds, TFSA, RRSP etc. We just get some OAS, CPP & Bank Interest in Canada. That's our only source of income.
What penalties, interest, capital Gains tax, we can expect as a Senior citizen for our mistake? Thanks.
Hi Aliki,
Thank you for your message and for providing detailed information about your situation. Based on the facts you've shared, here's an updated overview of the tax implications related to your departure from Canada and the sale of your home.
1. Departure Tax (Deemed Disposition) and Principal Residence
- Canadian Real Estate Exemption: Departure tax (deemed disposition) does not apply to Canadian real estate held by an individual or individuals. This means that your principal residence, which you jointly owned and lived in, is not subject to deemed disposition simply because you left Canada.
- Tax Residency: Since you still maintained a permanent home in Canada available for your use (the house), you will remain a tax resident of Canada until the home is sold and the title is officially transferred to the buyer. As such, your departure date will be August 2022, when the sale of your home was completed. Your departure date is therefore not March 2021, as you initially thought.
2. Reporting Capital Gains and Principal Residence Exemption
- Capital Gain: The capital gain on the sale of your home is calculated as the difference between the sale price (net of selling expenses) and the original purchase price (adjusted for any costs associated with the purchase and sale of the property).
- Sale Price: $1.15 million (net of selling expenses)
- Purchase Price: $220,000 (in 2000)
- Capital Gain Calculation: $1.15 million (sale price) – $220,000 (purchase price) = $930,000
If there were additional costs associated with the sale (e.g., real estate commissions, legal fees, etc.), these can be subtracted from the sale price to reduce the taxable capital gain.
Since the property was your principal residence throughout your period of ownership, you may be eligible for the Principal Residence Exemption (PRE) to eliminate or reduce the capital gain. The PRE applies for the years you lived in the home, but as you became non-residents in March 2021, the exemption may not apply to the period after that unless you qualify for specific exceptions (e.g., prorating based on the number of years you lived there).
- Principal Residence Exemption: You can claim the Principal Residence Exemption for the years you lived in the home as your principal residence. The period you lived in the home will likely cover most of the ownership period, but the portion of the gain attributable to the time you were a non-resident (after March 2021) may be subject to capital gains tax.
3. Filing the Departure Return
- Filing for 2022: Given your departure date is August 2022 (when the home was sold), you will need to file a departure tax return for the 2022 tax year. This return should include the capital gain from the sale and the Principal Residence Exemption for the period you lived in the property as a Canadian resident.
4. Deemed Non-Resident Status (Tax Treaty Considerations)
- Deemed Non-Resident: If you and your husband are considered deemed non-residents of Canada starting in March 2021 under the tax treaty between Canada and your home country, then your situation changes slightly. In that case, you would have been treated as non-residents for tax purposes in March 2021, and you would need to file a departure return for the 2021 tax year.
- You would also need to apply for a Certificate of Compliance (Form T2062) to report the sale of your home, the resulting capital gain, and the Principal Residence Exemption for the years you lived in the home.
- The T2062 will allow you to properly report the gain and claim the exemption while also addressing your non-residency status in Canada.
5. Next Steps
To summarize, I recommend the following actions:
- If you were non-resident as of March 2021 (due to a tax treaty):
- File a departure return for 2021.
- Apply for a Certificate of Compliance (Form T2062) for the sale of the home and report the capital gain.
- Ensure you claim the Principal Residence Exemption for the years you were a Canadian resident.
- If you remained a resident until the sale (August 2022):
- File a departure return for 2022.
- Report the capital gain from the sale and apply the Principal Residence Exemption for the period you were a Canadian resident.
If you're unsure about whether the tax treaty applies to your situation or need help with the specific forms, I can assist you with completing the required filings.