From: AlanBaggett@volcanomail.com   
      
   Save on capital gains with the best tax break in the country :CRA SOTW   
   Garry Marr | Feb 16, 2013 8:00 AM ET    
      
      
   Here’s a news flash for Canadian senators trying to justify where they live so   
   they can claim a few perks from Ottawa.   
      
   When it comes time to sell one of them could be the biggest break of all. The   
   Canada Revenue Agency allows you to pick the property where you have the   
   largest capital gain as your principal residence, and it could save you   
   thousands in taxes.   
      
   “I can’t think of any tax break of the same magnitude,” said Gurinder Sandhu,   
   executive vice-president of Re/Max Ontario-Atlantic and a trained accountant.   
      
   “The basic premise is that you designate the property with the largest gain as   
   your principal residence,” he says.   
      
   Jamie Golombek, managing director of tax and estate planning, says that means   
   Canadians can escape all taxes on profits from their sale of that home.   
      
   Typically, you pay tax on half of any realized capital again based on your   
   individual tax rate. So a $100,000 gain could cost you almost $25,000 in taxes   
   at the top marginal rate in Ontario.   
      
   Avoiding that hit might be the biggest break in the Canadian tax code. Put a   
   little sweaty equity into a house and it’s about the only way you won’t get   
   taxed on your work.   
   “At the time of sale you have to choose what you are designating as principal   
   residence. You can only have one for a calendar year,” said Mr. Golombek,   
   adding you only have to nominally inhabit the property.   
      
   That will be good news for people like Mike Duffy, the Conservative senator   
   who lists a home in Cavendish, P.E.I., as his primary residence. He has   
   expensed taxpayers $33,000 for his living accommodations in Ottawa, which he   
   says is his second home.   
      
   Some reports suggests few have seen Mr. Duffy near his cottage home but that   
   doesn’t mean much tax-wise because Mr. Golombek says you can spend as little   
   as one day per year and still claim the exemption.   
      
   The scenario of having two homes, each eligible for a capital gains break, is   
   one that plays out for many Canadians, not just senators. Some may even have a   
   cottage worth more than the home they reside in most of the year.   
      
   Remember when you do sell one of your homes, you either report the gain or the   
   government considers you claimed the exemption.   
      
   “When you sell the next one you’d only get [a break on a portion] of the   
   [capital] gain,” said Mr. Golombek.   
      
   Don’t pay the tax on the second home and you could be guilty of tax evasion.   
   And, if you think you can put one home in your name and the other your   
   spouse’s, you can’t. There’s one capital gain for both parties and that goes   
   for common-law couples too.   
      
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