Written on March 7, 2014 – 7:00 am | by Derek de Gannes
Executors may find themselves representing the estate of a non-resident person – perhaps someone who was once a resident in Canada and ceased their tax residence when they left Canada. Let’s say the now deceased non-resident, X, jointly owned property in Canada which was occupied by an adult relative at the time of death.
The Canada Revenue Agency (CRA) was asked whether (i) whether the principal residence exemption would be available with respect to X’s interest in the Canadian home, and whether it is possible to transfer the interest in the home to X’s spouse on a tax-deferred basis.
On the first question, the CRA expressed the view that the amount of the capital gain that is exempt from tax (the principal residence exemption) is based on the number of years in which the property is owned by X and the number of years in which the property qualifies as the X’s principal residence during which the X was resident in Canada.
On the second question, the CRA expressed the view that a transfer of a X’s capital property to a spouse or spousal trust as a result of the X’s death may occur on a tax-deferred basis, however, the X must have been a resident of Canada immediately before death for the rollover to apply.
Be careful what you ask for and thanks for reading.