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


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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.

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