No holiday from taxes
Now that summer is a distant memory and winter is coming, many
owners of recreational properties are considering a sale or
transfer to the next generation, either now in the fall, or next
spring before vacation season heats up again. If you’re in
this boat, you’ll need to do some tax planning because a sale
of the recreational property or transfer within the family can
result in a big tax bill.
Covering capital gains
It’s true that you can potentially “cover”
your capital gains tax exposure on a cottage or vacation home by
claiming the principal residence exemption. However, in order to be
eligible for the exemption, the property must be ordinarily
inhabited by you, your spouse, or your children. If the cottage is
purely meant to be an investment property, to be rented out
throughout the year, the principal residence exemption cannot be
claimed.
