The well-known principal residence exemption rules permit a
taxpayer to shelter the sale of property that is an
individual's residence. To address perceived loopholes
surrounding the capital gains tax exemption, the Government of
Canada introduced measures near the end of 2016 on the reporting
and claiming of property as a principal residence. These new rules
restrict the ability of a personal trust to designate a property
held in the trust as a principal residence for tax purposes.
Previously, almost any "personal trust" could
designate a property as its principal residence for a year,
provided the trust designated each beneficiary of the trust who
ordinarily inhabited the property as a principal residence in the
year, or whose spouse, common-law spouse or child did. Under the
previous rules the trust itself, but not the relevant occupant of
the property, had to be resident in Canada to claim the principal
residence exemption.
