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Hey my name is steve parr and today we are going to talk about the principal residence exemptions so the principal residence exemption allows you to sell a property and not pay any tax on it so the capital gain that you would normally accrue from the sale of that property doesn't apply and so this video we want to cover off some of the uh nuances of that and ensure that if you are thinking about making use of the principalities exemption that you are doing it properly so the first thing you want to keep in mind is that the exemption needs to be reported so since 2022 the cra has required that uh this exemption be reported on your personal income tax return so you want to make sure that you're working with your accountant to ensure that that is done and the second criteria is that resonance exemption is only going to apply to a property that you actually live in so a property the cra uses the term ordinarily inhabited so while there's not a specific set number of days that the cra sets out that you are actually resident inside of the home it is the cra if they assess uh and and look in deeper into whether the exemption actually applies or not they're gonna look at things like the length the amount of time that you are in the property they're going to look at your sources of income uh whether the whether the real estate sale was done as a part of another series of transactions so such as a like a real estate flipping venture so you want to ensure that uh that that the narrative that is behind the the sale of the property is is compliant with what the cra understands uh a principal residence exemption to apply for so the third piece is that if you are using your property to generate income um that is like through a long-term or short-term rental in general it's not going to qualify for the principal residence exemption so that is a different type of use of property termed an investment property and if it is if it's an investment property then it just doesn't qualify for it however there are some exceptions and principal residents can still meet that criteria if you are renting out for a very short period of time so perhaps you have a a summer cottage that you're just renting out for a couple of weeks a year uh on airbnb or another short-term rental site um that generally will be okay but you're going to want to check with your tax advisor before you confirm on that so the the last point that i want to bring up is that it's the principal residence exemption only applies on 1.2 acres of land so if you have a large property uh then it is not going to qualify for the principal residence exemption ...

FAQ

How is discharge of indebtedness treated?
In general, if you have cancellation of debt income because your debt is canceled, forgiven, or discharged for less than the amount you must pay, the amount of the canceled debt is taxable and you must report the canceled debt on your tax return for the year the cancellation occurs.
How much tax do you have to pay on forgiven debt?
Most canceled debt is taxableIf you are able to get a settlement that's significantly less than your total debts owed, you will be taxed on any forgiven debt over $600. The creditor is required to file a 1099-C form with the IRS, which will detail the amount of your settled debt, says Tayne.
What qualified principal residence indebtedness may be excluded from income?
Qualified principal residence indebtedness is limited to $800,000 ($400,000 for married/RDP filing separate), and. Taxpayers may exclude from gross income up to $500,000 ($250,000 for married/RDP filing separate) of mortgage debt forgiven.
Is discharge of indebtedness taxable?
In general, if you have cancellation of debt income because your debt is canceled, forgiven, or discharged for less than the amount you must pay, the amount of the canceled debt is taxable and you must report the canceled debt on your tax return for the year the cancellation occurs.
What is discharge of indebtedness in a title 11 case?
You may know your title 11 case by the chapter (such as, for example, chapter 7, 11, 12, or 13) under title 11 that you sought debt relief. Discharge of indebtedness. The term discharge of indebtedness conveys forgiveness of, or release from, an obligation to repay.
What is discharge of qualified principal residence indebtedness?
Qualified principal indebtedness includes any debt from acquiring, constructing, or improving a principal residence that is secured by the principal residence. A taxpayer can only have one principal residence at a time. This is generally the home where you live for the majority of the time.
What is discharge of indebtedness?
Debt discharge is the cancellation of a debt due to bankruptcy. When a debt is discharged, the debtor is no longer liable for the debt and the lender is no longer allowed to make attempts to collect the debt.
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