The TaxLetter: Caveat Venditor

Last year was a seller's market for summer homes. With the pandemic and lock down, city folks were paying premium prices for a place by the water. This year might be an even "hotter" market for sellers - the pandemic is still in full force but it feels like people are even more determined to get out of the city after not being able to travel for over a year. So demand is high. And if you are thinking of cashing on that demand as a seller, then consider the following tax issues before you decide to put the For Sale sign up.

Tax consequence of a Sale

Many, many years ago, a family was eligible for a double principal- residence exemption. However, in the early 80s, the tax rules were changed so that now there is essentially a one-principal-residence-per-family rule (with some tax relief still potentially available for second properties owned prior to 1982). What this means is that if you sell or transfer the cottage, capital gains tax may be payable on your "home