The Canadian tax system has what is referred to as the
'principal residence exemption.' This exemption allows you
to sell a residence that you 'ordinarily inhabited' and pay
no tax on the capital gain that will arise if the property
increases in value from the date of purchase. In general terms, a
principal residence is defined to include:
- A house
- A cottage
- A mobile home
- A leasehold interest in a house
- A share of the capital stock of a co-operative housing
corporation
Further, 'ordinarily inhabit' is not a defined term in
the Income Tax Act. This is generally based on the facts of each
situation. However, you don't need to spend a significant
amount of time at the residence in order for it to be considered
ordinarily inhabited. It is generally accepted that visiting a
property for a short period of time each year may allow a taxpayer
to meet the ordinarily inhabited requirement for that year.
