Canadian Tax Principles
Principal Residence Designation Question:
Ms. Annalisa Philson has been married to Spiro Philson for over
10 years. While Annalisa is 32, her husband is 75 and has been in
poor health for a number of years. They live in a home in Ottawa
which Spiro purchased as a wedding gift for her in 2007 for
$628,000. Annalisa is the sole owner of this property.
On a 2009 business trip to Calgary, Annalisa met Arnold Schwarz,
a fitness trainer at the hotel where she stayed. The attraction was
immediate and mutual and Annalisa has traveled regularly to Calgary
to spend time with Arnold since then. In 2010, Annalisa purchased a
condo in downtown Calgary for $325,000 and gave Arnold a key. In
every year since its purchase, she has spent considerable time with
Arnold in this property.
The year 2018 turned out to be an Annus Horribilis for Annalisa.
To begin, her husband obtained well documented proof of her
infidelity after hiring a private investigator. As a result, he
moved out of the Ottawa home and removed her from his will where
she had been the sole beneficiary of his considerable estate.
To make matters worse, on her last visit to Calgary, Arnold
informed her that, at 32, she was now too mature for his tastes and
he made other living arrangements.
These events have left Annalisa determined to charge her
lifestyle. She decided to sell both properties and move into a
religious community that requires a vow of celibacy from all of its
residents.
As Annalisa has spent time in each property during every year of
ownership, either one can be designated as her principal residence
for any given year of ownership.
Both properties are sold quickly in 2018, with the Ottawa home
going for $724,000 and the Calgary condo selling for $415,000. The
real estate fees on each sale are 4 percent of the sales price.
After receiving the proceeds, Annalisa decides to go on one last
trip to Cancun before starting her new life.
Required: Describe how the residences
should be designated in order to accomplish Annalisa's goal. In
addition, calculate the total amount of the gain that would arise
under the designation that you have recommended.