Deceased on Oct 1 2018 doing a t3 return with year end of Dec 2018. Do i have to enter her principle residence on the return. It has not yet been sold

I agree with J. Parsons re the trust year end. Using Dec. 31 as the first year end is ridiculous under the circumstances. I do disagree with his last sentence - I would call  it a recommendation, not a thought.
I'd be interested in J. Parson's opinion on another aspect of this situation. Usually when a residence is disposed of which was a principal residence for only part of the time it was owned, the portion of the gain that is taxable is a time allocation - i.e. the fair market value at the time of the change in use is not relevant because there was no change in ownership. But I am wondering if in a case like this, it is considered that there has been a change in ownership --i.e. a deemed disposition from the deceased to the testamentary trust-- and therefore the fmv at the date of death would be relevant.

• rmcinnes

HaHa, Sorry rmcinnes, you're right.  I guess my last sentence really was more of a suggestion than merely a thought.

You have also brought up an interesting point which may suggest my comment at the end of the second paragraph is not accurate. There is a rollover provision under S 40(4) with respect to the disposal of a principal residence to a spouse or trust for spouse which basically allows for the spouse or a qualified trust to continue in the same position that the deceased would have been in. In other words, if the years of ownership of the principal residence were, say 25, then the spouse or spousal trust would get to count those 25 years plus whatever the remaining period was before eventual disposition towards the principal residence exemption. I didn't think that had any relevance in the situation that the original questioner posed, but my assumptions could be out in left field. Generally, if the death is just that of the first spouse, I don't file a principal residence exemption declaration if the surviving spouse continues to stay in that house.

Beyond that specific rollover provision, however, I believe there has to be a disposition recorded on the final T1 as a taxpayer is deemed to have disposed of all property on death. The last time I had that situation, my late client's house was sold about four months after her death so we took the short-cut route of claiming that the FMV on death was the same as the selling price four months later just to save appraisal fees. Actually, the executor couldn't get what he thought was a fair price four months earlier on the date of his aunt's death, so let the property go to a third party at about $15,000-$20,000 less than what he had estimated it was worth. The fact that the third party knew this house would eventually come up for sale and made the first overtures had some effect on the final price as both sides avoided any realtor fees.

• jparsons