According to the Canadian Revenue Agency (CRA): “To make this election, attach a letter signed by you to your income tax and benefits return for the year in which the change of use occurs, describing the property and stating that subsection 45(2) of the Income Tax Act should apply.”
Therefore, no special form is required to exercise this selection.
A taxpayer in Canada may give you the option to increase the four-year period indefinitely, but to accomplish that, your employer or your spouse’s employer must ask you to relocate. It seems like you moved to search for work, Hugh, in order that extension won’t apply.
Late submission of a vote
The 45(2) election have to be filed within the 12 months you progress out. The deadline is the filing date to your tax return that 12 months. For most taxpayers, this is able to be April 30, and for self-employed individuals or their spouses, it’s June 15.
The CRA may accept a late-filed election under subsection 45(2) in case your situation matches one in every of the exceptional circumstances listed.
There is case law that supports late-filed ballots. In Irene Certainly against the Canada Revenue Agencythe CRA was directed to reconsider an ineligible 45(2) election that the taxpayer had filed late despite the absence of outstanding circumstances.
For the late-filed election, the CRA can impose a penalty of $8,000 or $100 monthly after the due date, whichever is less. If the tax savings are greater than the penalty, a late-filed election could also be well worth the penalty risk.
Capital gains tax on changes in use of a property
Because a house converted to a rental property is subject to a deemed disposal on the time of conversion, the fair market value on the time the rental commences is the adjusted cost base (ACB) for capital gains tax purposes. An election under paragraph 45(2) could postpone this conversion date.
