S 45(3) election

Forum|Forum|3 years ago
April 19, 2023
2 replies
8 views

Does my client need to write a letter to CRA for Section 45(3) election (she sold her principle house and move to her rental apartment in 2022)? In the content of the letter, it is just told she wants to postpone reporting the disposition of her apartment

or she did not need to do anything in her 2022 tax return?

When is make the letter of this election? In 2022? or until the actual sale of the apartment?

What needs to do for her T776?

Thank you so much!

ProFile (Canada)

This topic has been closed for replies.

J

janisbossenberry

Level 7

The 45(3) election is filed by the filing due date for the taxation year in which the property is actually disposed of, so when the apartment that she moved into is actually sold. For 2022, you record the rental activity on the T776 for the part year and mark it as the last year of rental.

If you have claimed CCA on the rental apartment, the 45(3) election is not available/cannot be made. You must, in that case, record the disposition on the T776 (building) and Schedule 3.

P

potaxAuthor

Level 3

Is it the 45(3) election that is filed by the filing due date for the taxation year in which the property is actually disposed of, so when the apartment that she moved into is actually sold?

For example: If she moved in 2020 and sold in 2022. No need to submit the election in 2020. Is the 45(3) election need to be filed and attached to her 2022 tax return? What is the content of the election letter?

In her 2020 tax return, is it just a check this is last year's rental in T776 and report the rental income and expense before she moved into it? and no need to make a note to CRA that this rental property will be paid the capital gain until actually sold.

Thanks a lot.

J

janisbossenberry

Level 7

Yes, if it was a rental property up until she moved into it in 2020, just record the part year rental income and expenses and mark it as the last year of rental. No other notification is needed to CRA. This is what CRA says about the 45(3) election:

To make this election, attach a letter signed by you, and send it with your income tax return. If you are filing your return electronically, send the letter to your tax centre. To find the address for your tax centre, go to Find a CRA address. The letter should describe the property and state that you are making an election under subsection 45(3) of the federal Income Tax Act.
You have to make this election by the earlier of the following dates:
- 90 days after the date we ask you to make the election
- the date you have to file your income tax return for the year in which you sell the property

If you make this election, you can designate the property as your principal residence for up to four years before you occupy it as your principal residence.

I used to just do the election by putting the taxpayer's name, SIN, and address, state that I am electing under ITA 45(3) to not have the deemed disposition rules apply to: and put the address of the property. Then, in the year the now principal residence is sold, report like normal using the S3PrincipalResidenceDetails and T2091 forms in Profile, designating the property as principal residence for the years it actually was a principal residence, plus up to 4 years that it was a rental property.

P

potaxAuthor

Level 3

If you make this election, you can designate the property as your principal residence for up to 4 years before you actually occupy it as your principal residence.

For my example: She bought this rental property in 2010, sold her principal house in 2020, and moved into her rental property in 2020. Finally, she sold this rental property in 2025.

She can designate the property as her principal residence for up to 4 years before she actually occupies it as her principal residence, is it the year 2016? is her capital gain on this rental property calculated from 2010 to 2016?

Thank you very much.

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