A couple owns two properties: their principal residence worth $800,000 and a cottage worth $300,000. If they sell the cottage for $450,000, what strategies could minimize their tax liability?
Correct Answer
B) Designate the cottage as principal residence for some years
Each family unit can only designate one property as their principal residence per year, but they can strategically designate which property receives the exemption for different years of ownership. By allocating some years to the cottage, they can reduce the taxable portion of the capital gain on its sale.
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Previous Question
A couple in Ontario sells their city home and their cottage in the same year. Both were ordinarily inhabited by the family every year they were owned, but a family unit can designate only one property as its principal residence for each year. Which approach generally minimizes their total taxable capital gain?
Next Question
A couple purchased their home in Vancouver for $800,000 in 2018 and sold it for $1,200,000 in 2024. They lived in it as their principal residence for the entire period. How much capital gains tax will they pay?