Moving to new home. How to decide closing date of my current home?
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Posted on: 20-11-13 14:57:23
Hi Guys,
I have bought new home (under construction) and closing date is 29th May 2014.
I am selling my current home and wondering what should be the closing date for my current home if buyer is flexible.
From taxation point of view, what will be the difficulty if my selling date of current home is after 29th May? I prefer to have both homes (at least for few days) with me for easy moving. I understand that I'll have to take bridge loan. That is okay but what about calculating capital gain for those few days (From 29th May the new home will become my primary residence). What kind of paper work I or lawyer has to take care?
If that is big headache, I will prefer to sell couple days before and use mobile storage for few days. What do you think?
Any suggestion or idea?
Thanks,
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Success is Never Ending and Failure is Never Final.
Quote:
Originally posted by meitsme
Hi Guys,
I have bought new home (under construction) and closing date is 29th May 2014.
I am selling my current home and wondering what should be the closing date for my current home if buyer is flexible.
From taxation point of view, what will be the difficulty if my selling date of current home is after 29th May? I prefer to have both homes (at least for few days) with me for easy moving. I understand that I'll have to take bridge loan. That is okay but what about calculating capital gain for those few days (From 29th May the new home will become my primary residence). What kind of paper work I or lawyer has to take care?
If that is big headache, I will prefer to sell couple days before and use mobile storage for few days. What do you think?
Any suggestion or idea?
Thanks,
If you are selling your existing principal home and buying the new home for your own usage (principal home) then you do not need to pay any capital gain on the sale of your existing home as principal homes are exempt of Capital Gain. The intervening days does not take away this exemption from you as both the transactions are separate. You can sell the existing home and do not buy for 1 year or more and go on rent or go on to live with your relatives, you still do not pay any capital gains if the home you sold was your principal home.
If you qualify and if the lender does allow, you can go for a bridge loan and do the move according to your convenient. As it is, the new build possession date is not always a fixed date and can move ahead for reasons out of control for the builder. So, if the buyer is flexible, then you should not have much problem.
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Pramod Chopra
Senior Mortgage Consultant
Mortgage Alliance Company of Canada
Thanks for detail response. I still have few questions.
Let's assume I am selling my current home on 7th Jun.
Moving to new home on 29th May.
I am getting bridge loan for 10 days. I believe capital gain need to pay for 10 days.
Who can decide the price of my current home on 29th May when I moved to new principal home?
What kind of paper work need to be done for CRA?
Does lawyer take care of all these paperwork?
Thanks.
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Success is Never Ending and Failure is Never Final.
Quote:
Originally posted by meitsme
Thanks for detail response. I still have few questions.
Let's assume I am selling my current home on 7th Jun.
Moving to new home on 29th May.
I am getting bridge loan for 10 days. I believe capital gain need to pay for 10 days.
Who can decide the price of my current home on 29th May when I moved to new principal home?
What kind of paper work need to be done for CRA?
Does lawyer take care of all these paperwork?
Thanks.
Even though there is a 10 day or more gap in buying a new home and selling the old one, you still DO NOT need to pay any capital gain because;
1. During the 10 days you did not rent out the existing home,
2. The value has not gone up as you had already signed a contract to sell the house for a particular price and as such you will not get a cent extra then the price you have already contracted to sell your home for.
So, you do not need to worry about any Capital Gain if the house you are selling was your principal home.
May be reading from this http://www.cra-arc.gc.ca/tx/tchncl/ncmtx/fls/s1/f3/s1-f3-c2-eng.html from CRA's website would clear your doubts. I am posting the relevant portion here for quick read.
More than one residence in a tax year
2.28 While only one property may be designated as a taxpayer’s principal residence for a particular tax year, the principal residence exemption rules recognize that the taxpayer can have two residences in the same year, that is, where one residence is sold and another acquired in the same year. The effect of the one plus in variable B in the formula in ¶2.20 is to treat both properties as a principal residence in such a year, even though only one of them may be designated as such for that year.
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Pramod Chopra
Senior Mortgage Consultant
Mortgage Alliance Company of Canada
The calculation for the principal residence exemption takes into account the fact that you may have two principal residences in a particular year, because you will be selling one and purchasing another.
I was going to make the reference to the same Income Tax Folio, but Pramod beat me to it!
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Madan Chartered Accountant team
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