Tax lawyer Johanna Caithness discusses principal residence exemption quagmire for cabin owners in Winnipeg Free Press article.
In Joel Schlesinger’s article “A problem of principal: Tax exemption on sale of your home can present a tricky conundrum if you own the cabin,” Fillmore Riley’s Johanna Caithness says that although it is important to take applicable tax exemptions and planning strategies into account, taxes aren't always the biggest planning consideration when it comes to dealing with the family cabin and other real property.
Schlesinger describes the tax exemption rule that allows homeowners to sell their properties without paying capital gains tax on the gain in value from the time they own the home until its sale, but you can only claim one property as your principal residence for a year. The disposition of a property where the exemption is not claimed may result in a steep tax bill.
It’s a quagmire many boomers face as they consider how best to deal with the family cabin. Johanna Caithness says the bottom line is that there are many factors to consider and that it is key to obtain professional advice before any transactions occur, to avoid unintended problems. To read the full article, click here.