On January 1, 2020, Marcus Abbott permanently emigrates from Canada. At that time, his only property consists of his principal residence and a small apartment building. His principal residence was purchased several years ago at a cost of $650,000. Of this total $150,000 relates to the land. The current fair market value of his residence is $975,000. The value of the land is unchanged at the time of his departure. The apartment building had a capital cost of $870,000, with $170,000 of this total allocated to the land. The building had a January 1, 2020 UCC of $476,000. At the time of his departure, the apart- ment building has a fair market value of $1,200,000, with the value of the land remaining at $170,000. What is the minimum addition to Mr. Abbott's Net Income For Tax Purposes that results from his departure?

Question

Quizplus · Accepted Answer

When a Canadian resident emigrates, they are deemed to have disposed of certain types of property at their fair market value and to have immediately reacquired them for the same amount, which can result in a capital gain. However, there is an exception for property that is considered "taxable Canadian property," which includes a principal residence. Therefore, the increase in value of the principal residence would not result in a taxable capital gain upon emigration. Similarly, real property located in Canada, such as the apartment building, remains taxable Canadian property, and its disposition upon emigration does not result in a capital gain that would increase net income for tax purposes. Thus, the minimum addition to Mr. Abbott's Net Income For Tax Purposes as a result of his departure is nil.

On January 1, 2020, Marcus Abbott Permanently Emigrates from Canada