I'm trying to think through a situation for my brother where he co-owns two homes, one of which is with me which he wants to gift to me. I'm not sure how principal residence exemption works on his second home. OH also, the properties are in Canada, Ontario and we are all Canadian citizens.

My brother's situation is this:

  • 2006 to 2019 - a jointly owned house with me

  • 2012 to 2019 - a jointly owned second house with his wife

My brother wants to "give" (I don't know yet what give means, whether it is a gift, or a purchase etc...) me his half of the house that he co-owns with me entirely to me, because let's say for argument that I paid all the expenses and mortgage and everything related to the house. Let's also say he claims principal residence exemption for 13 years from 2006 to 2019 as part of the land transfer. Because my brother lived in our house during that whole time. And now in 2019, after "giving" the house to me, he will live with his wife in the house they purchased together in 2012.

Now let's say 2 years from now in the year 2021, my brother and his wife want to sell their house and buy and move into a different house. Does that mean my brother has to pay capital gains tax on 7 years of this second house (2012 to 2019), and can have only 2 years of principal residence exemption (2019 to 2021)?

1 Answer 1


Ownership is only one part of the rule.


A property qualifies as your principal residence for any year if it meets all of the following 4 conditions:

  • It is a housing unit, a leasehold interest in a housing unit, or a share of the capital stock of a co-operative housing corporation you
    acquire only to get the right to inhabit a housing unit owned by that corporation
  • You own the property alone or jointly with another person
  • You, your current or former spouse or common-law partner, or any of your children lived in it at some time during the year
  • You designate the property as your principal residence

For the property to be the principal residence for your brother for any one year, all of the criteria must be met.

It is conceivable that the property was the principal residence for some years and not for others.



It is possible that the property was, for a certain period of time, the principal residence and then ceased to be so, and then, after some years, became the principal residence again. The capital gain for that period would be subject to the exemption. At the beginning of the second period to the end of the that period the capital gain would be subject to tax. The capital gain during the third period would be again subject to the exemption.

hope that helps.

  • If a house is one's principal residence then it is exempt. By 13 years you mean 2006 to 2013 or the period up to 2033? Gifts are another thing too. I'm not current on that part of the Income tax act but searching should give you some information to help formulate how to think through the problem.
    – C'est Moi
    Oct 16, 2019 at 22:15
  • Apologies for confusion, but I updated the last 2 paragraphs in my question to correct some logic and calculation errors. Oct 16, 2019 at 22:25
  • My accountant called me and said we can get around the capital gains tax by saying I am the beneficiary of the house and that my brother never lived in it at all. He was just there to get a security or a proxy or something to that effect. Oct 17, 2019 at 1:03
  • @John "Because my brother lived in our house during that whole time" ... "we can get around the capital gains tax by saying [...] and that my brother never lived in it at all" Let's hope the CRA doesn't read PF&M...
    – TripeHound
    Oct 17, 2019 at 7:14
  • One would hope it was a poorly worded precis, caused in part by a layman's incomprehension of the unconstitutionally complex nature of the income tax act and his victimization at the hands of 1960s educational reform, of his accountant's in no-ways illegal or unprofessional assessment of the matter.
    – C'est Moi
    Oct 18, 2019 at 20:42

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