Probate Points to Remember Part 2 – Some Additional Tips, Passing Of Trustees’ and Executors’ Accounts. If instead the executor sells the residence during the period of the estate administration, the residence is treated for income tax purposes as a capital asset held for investment purpose. I will not go into the mechanics of these now, but I would strongly recommend anyone looking to use these strategies seek the advice and assistance of a professional accountant who regularly handles estate tax matters. CRA’s Guide T4011 – Preparing Returns for Deceased Persons, Income Tax Folio S1-F3-C2: Principal Residence. Katie is engaged in a broad practice in the areas of charities and not-for-profit law, which includes preparing applications for charitable status, assisting clients with transitioning to the new federal or provincial not-for-profit legislation, drafting endowment and gift agreements and advising on administrative and tax-related issues. Here’s the short and not-so-sweet of it: A real estate property which was the deceased’s principal residence and has remained vacant since the date of death will be taxed on any gain in value from the date of death. 300 - 505 Sixth Street, New Westminster, BC V3L 3B9 In the U.S., the … Others may be confused because of the principal residence “plus one year” rule. The spouse and minor children of a specified beneficiary will also be unable to claim the principal residence exemption in respect of other property for that year. The Principal Residence Exclusion, or Section 121 Exclusion, allows an individual to shield up to $250,000 of primary residence. To qualify as a principal residence, the taxpayer must reside in the property during the year and designate the property as his principal residence for the year. This is called a deemed disposition and if the deemed disposition of assets result in a gain, then tax will be payable on that gain. The designation of the property as a principal residence by the trust for year results in the property being deemed to be the principal residence of every specified beneficiary of the trust for that year. This subsection provides that a beneficiary to whom property is distributed, on a tax-deferred basis per subsection 107(2) of the Income Tax Act, will be deemed to have owned the property continuously since the trust last acquired it for purposes of the principal residence exemption. However, as of October 3, 2016, changes to the principal residence rules significantly limits the ability for an Estate to claim the Principal Residence Exemption. Copyright 2016 All About Estates. I would specifically like to discuss how a person’s principal residence is taxed after death where the property is sold and the cash proceeds distributed to the beneficiaries. principal residence exemption will not be available. Unfortunately, there are many circumstances in which it may not be advisable for the trust to transfer property to a beneficiary prior to that property being sold. There are a number of criteria to be met in order for a property to qualify as a principal residence for all years owned which I will not be going into detail here. Also, it is possible for real estate held by an estate to qualify as a principal residence. So, if you own and live in a detached or In October, fellow blog-poster Corina Weigl wrote regarding the impact on individuals of recent changes to the rules surrounding the principal residence exemption. In other words, you will not be able to claim another property as well during that time period as your main residence CGT-exemption purposes. Why is this such a common misconception? The tax rules contain a rule that provides relief in this case. In addition to the changes impacting individuals, significant changes are proposed that will restrict the ability of trusts to claim the principal residence exemption residence for tax years after 2016. This is known as the “principal residence exemption” (PRE) which has been a part of the Canadian tax system for many many years. A recent Michigan Court of Appeals opinion held that a life estate holder was a home “owner” and, therefore, entitled to a Principal Residence Exemption (PRE) under Michigan’s General Property Tax Act. Heather MacLean, CPA, CGA The good news is that trusts that are currently able to claim the principal residence exemption will continue to be able to do so on gain accrued up to and including the end of 2016. In order to take advantage of the principal residence exemption … The estate will get to use the loss to reduce any gains realized on other estate assets. 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