*The Commerce Journal>>>Canada Taxes

How long must you live in a principal residence in Canada to avoid paying capital gains on the sale of it?

Do I have to live in it a year or six months or less....Can't seem to get a clear answer with Revenue Canada

You must own and live in that residence DURING SOME PART OF A YEAR (that can be less than 6 months), and you can only claim one tax free principal residence exemption each year.

To designate a property as principal residence, an individual must own the property, either solely or jointly with one or more other individuals. In addition, the owner, his or her spouse, former spouse, or children must also ordinarily inhabit the residence during some part of the year.

PS. I have noted that at least two persons in this Canada tax forum have indicated that flipping principal residences year after year may result in taxation by the CRA. I beg to differ. If the tax law does not want cdn taxpayers to claim the principal residence exmeption every year, it would say so in the cdn income tax act, but it does not. I dont think there is a misuse of the principal residence exemption or an abuse of the Act read as a whole, that triggers the General Anti Avoidance Rule in section 245 of the Act.

CRA can also disallow properties bought for flipping purposes. So if you buy and sell within a year, be prepared to justify why, or they may infer it was a business deal rather than your primary residence. Do it several years in a row, and they almost certainly will.

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