When you change your rental or business property to a principal
residence, you can elect to postpone reporting the disposition of
your property until you actually sell it. However, you cannot make
this election if you, your spouse or common-law partner, or a trust
under which you or your spouse or common law partner is a
beneficiary has deducted CCA on the property for any tax year after
1984, and on or before the day you change its use.
This election only applies to a capital gain. If you claimed CCA on the
property before 1985, you have to include any recapture of CCA in
your business or rental income. Include the income in the year you
changed the use of the property. If you need more information on
the recapture of CCA, see the T4002, Self-employed Business,
Professional, Commission, Farming, and Fishing Income guide or
T4036, Rental Income guide.
If you make this election, you can designate the property as your
principal residence for up to four years before you actually occupy it
as your principal residence.
To make this election, attach to your income tax and benefit return
a letter signed by you. Describe the property and state that you
want subsection 45(3) of the Income Tax Act to apply. You have to
make this election by whichever of the following dates is earlier:
• 90 days after the date the CRA asks you to make the election
• the date you are required to file your income tax and benefit
return for the year in which you actually sell the property