Does the principal residence exemption apply in Canada if I sell a home I owned for less than a year?
This answer covers Canadian federal tax law, which applies in every province.
Usually not. If you sell a housing unit in Canada, or a right to acquire one, that you owned or held for less than 365 consecutive days, the gain is deemed business income, the property is deemed inventory rather than capital property, and the principal residence exemption does not apply. The rule applies to dispositions after 2022.
There are exceptions. The rule does not apply to a sale that can reasonably be considered to occur due to, or in anticipation of, death of you or a related person, a related person joining your household, a marriage or common-law partnership breakdown (separated at least 90 days), a threat to personal safety, serious disability or illness, an eligible relocation, involuntary termination of employment, insolvency, or destruction or expropriation of the property.
A business loss on a flipped property is deemed to be nil, and property that was already your inventory is outside the flipped-property definition. Whether an exception fits is a question of facts, so confirm with a lawyer or accountant before you file. Keep records of why and when you sold.
Key takeaways
- A housing unit in Canada held less than 365 consecutive days before sale is a flipped property, and the gain is deemed business income.
- A flipped property is deemed inventory rather than capital property, so the principal residence exemption does not apply.
- Exceptions cover events such as death, relationship breakdown, serious illness, an eligible relocation, insolvency or involuntary job loss.
- A business loss on a flipped property is deemed to be nil.