As a general rule, the sale or disposition of any residential
property in Canada triggers a capital gain, or, in an unlikely
scenario, a capital loss. The capital gain is equal to the
difference between the adjusted cost base (the amount for which the
property was purchased) and the price at which it was sold. It is
not necessary for the property to have actually been sold; it is
enough for a tax rule or regulation to deem that a sale
(disposition) took place to trigger a capital gain.
Fortunately, the Principal Residence Exemption ("PRE")
can offset or even eliminate completely a capital gain, whether the
property was sold or otherwise deemed to have been disposed of. The
purpose of the PRE is to allow Canadian property owners to sell
their properties and reinvest into the purchase of a new home on a
tax-free basis. This exemption can be used for the property that
the taxpayer designates as their "principal residence." A
principal residence is defined as one that is
