ARTICLE · 28 DECEMBER 2016

Don't Sell Yet: How Changes To The Principal Residence Exemption (PRE) Affect Trusts Effective January 1, 2017

McInnes Cooper

Effective January 1, 2017, the kinds of trusts that can claim the Principal Residence Exemption (PRE) will be limited.

CanadaTax

Effective January 1, 2017, the kinds of trusts that can claim the Principal Residence Exemption (PRE) will be limited. Now, the PRE allows Canadian resident taxpayers and personal trusts to reduce or eliminate a realized capital gain and the associated tax on the sale of a principal residence. But after December 31, 2016, amendments to the Income Tax Act (Canada) kick in and only certain kinds of trusts will be able to claim the PRE – and many trusts could face unanticipated capital gains taxes on the sale of a principal residence.

Trusts that hold a principal residence as a trust asset, but no longer qualify for the PRE shouldn't, however, hand over the keys just yet. Here's the problem with trusts claiming the PRE starting January 1, 2017 and a possible solution to the problem.

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Don't Sell Yet: How Changes To The Principal Residence Exemption (PRE) Affect Trusts Effective January 1, 2017

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