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I have owned my principal residence for over 25 years. In 2019 I invested with a friend and purchased a property that needed renovations and thought we might move there. We have completed the renovations but not fond of the area so we want to sell it. No one has lived in the property. Would
Like to get any information you can share or the best options tax wise.
Hi Cindy,
Thank you for reaching out and sharing the details of your situation.
It sounds like you’ve done a lot of work on the property since purchasing it in 2019, and I understand that you’re now considering selling it. Since the property has not been lived in, there are a few important tax considerations to keep in mind:
1.Principal Residence Exemption (PRE): As you’ve owned your current principal residence for over 25 years, you can potentially claim the Principal Residence Exemption (PRE) on the sale of that property. However, the property you purchased in 2019, which has been vacant, would not qualify for the PRE unless it was your principal residence at some point.
2.Capital Gains on the Investment Property: If you sell the 2019 property (which is now considered an investment property), any gain from the sale would be subject to capital gains tax. Since no one has lived in the property, the capital gains exemption available to principal residences will not apply to this second property. However, if the property has increased significantly in value, it’s important to calculate your adjusted cost base (ACB), which will include the purchase price plus the cost of renovations you’ve done.
3.Possible Tax Deductions: If the property is being sold as part of a partnership or business arrangement with your friend, there may be additional tax considerations, including how the gain is split and reported.
Given that there are multiple factors to consider, I would recommend having a meeting or call to go over all the details to ensure you make the most tax-efficient decision.