Should I have recorded a principal residence disposal on final T1 return?

Taxpayer died in 2016 and the principle residence was just sold in 2018. I did not complete the T1255 in 2016 and can only find T2091 in 2016. Now that I know the sale price, should I refile the 2016? I assume I have to do nothing on the trust return regarding the sale. Is that correct? Thanks

Answer

1 person found this helpful

Hi colleen,

All assets are considered sold on death in a deemed disposition.  Unless there were specific designations of the assets to beneficiaries, the estate would then pick up all of the assets at a cost equal to the deemed disposition.  If my understanding of your question is correct, the estate was the one who sold the property.

On the terminal return, schedule 3 should have been filled out to dispose of the residence.  T2091 should also have been filled out.  Any investments not in registered accounts should have also been 'sold' at fair market value, along with all other properties (including jewelry, artwork, coin collections, etc - see listed personal property) and reported on schedule 3.

Estate tax returns would have to be filled out annually until the estate no longer holds any assets.  When the residence is sold, the estate would report it as a capital gain on that years estate tax return.

Take an example where the property was bought 20 years ago for $250,000.  The individual used it as their principal residence until death when it was worth $750,000.  This gets reported on the terminal return, but no tax is paid since it was the principal residence.  The last few years have been a hot real estate market so the property increased to $1M by the time it was sold.  The estate would have to report a $250,000 capital gain on the disposition (less expenses related to the sale).  This same example could be done for other types of investments.

Hope this all makes sense.

Was this answer helpful? Yes No

No answers have been posted

More Actions

People come to ProFile for help and answers—we want to let them know that we're here to listen and share our knowledge. We do that with the style and format of our responses. Here are five guidelines:

  1. Keep it conversational. When answering questions, write like you speak. Imagine you're explaining something to a trusted friend, using simple, everyday language. Avoid jargon and technical terms when possible. When no other word will do, explain technical terms in plain English.
  2. Be clear and state the answer right up front. Ask yourself what specific information the person really needs and then provide it. Stick to the topic and avoid unnecessary details. Break information down into a numbered or bulleted list and highlight the most important details in bold.
  3. Be concise. Aim for no more than two short sentences in a paragraph, and try to keep paragraphs to two lines. A wall of text can look intimidating and many won't read it, so break it up. It's okay to link to other resources for more details, but avoid giving answers that contain little more than a link.
  4. Be a good listener. When people post very general questions, take a second to try to understand what they're really looking for. Then, provide a response that guides them to the best possible outcome.
  5. Be encouraging and positive. Look for ways to eliminate uncertainty by anticipating people's concerns. Make it apparent that we really like helping them achieve positive outcomes.

Select a file to attach: