45 3 election

Tax-women · ‎April 26, 2022

Hi.

Does my client have to file 45(3) if she just move back to her house, (stopped renting), and she is not planning to sell it right now?

Do I have to do anything on return other then check box, "Last year to rent"?

beside that , is there some sort of form to fill in or just hand written letter that she moved back to her house... and that's the "election".?? I still dont understand What exactly should be in that letter...

please, dont just copy and paste from cra webb.... i can do that as well. i just would like human logic answer.

thank you, appreciate it

from CRA.."

To make this election, attach a letter signed by you to your income tax and benefit return of the year in which the change of use occurs. Describe the property and state that you want subsection 45(2) of the Income Tax Act to apply

janisbossenberry · ‎April 27, 2022

The 45(3) election is made in the year that the property is actually disposed of (unless CRA demands it earlier for some reason - I have never seen that happen). When you make it, just do up a "form", with the header being the taxpayer name and SIN, note the address of the property, and the wording in the body of the "form" that I used to put was:

"I hereby elect under subsection 45(3) to not have the deemed disposition provision of subsection 45(1) apply."

Making the election allows you to claim the principal residence exemption for an additional 4 years prior to moving into the house after the rental period. Note that you cannot make it you claimed a principal residence exemption on any other period during the rental period, or if you claimed CCA on the rental property.

View solution in original post

janisbossenberry · ‎April 27, 2022

The 45(3) election is made in the year that the property is actually disposed of (unless CRA demands it earlier for some reason - I have never seen that happen). When you make it, just do up a "form", with the header being the taxpayer name and SIN, note the address of the property, and the wording in the body of the "form" that I used to put was:

"I hereby elect under subsection 45(3) to not have the deemed disposition provision of subsection 45(1) apply."

Making the election allows you to claim the principal residence exemption for an additional 4 years prior to moving into the house after the rental period. Note that you cannot make it you claimed a principal residence exemption on any other period during the rental period, or if you claimed CCA on the rental property.

Tax-women · ‎April 27, 2022

Thank you so much for clearing this up for me. Greatly appreciated.

If i may ask one more thing...:)). As i said before, she moved back for 100 %... does she need send "other form/ letter" for.. "Change of use?"

Thank you ahead.

janisbossenberry · ‎April 27, 2022

No, nothing else is needed. Just stop reporting the rent, and then make the 45(3) election when the property is eventually sold. With the election, you are electing to not report it as a change in use. If you cannot make the election (because you claimed CCA or had another principal residence while renting), then you do have a change in use and report the disposition of the rental property at FMV at the time you move in.

jrbooks · ‎April 30, 2022

It's the 45(2) election which has to be filed at the time of year of use - when a property goes from principal residence to rental/commerical. And there's a time limit as to how long that election lasts.