Sale of Principal Residence (S3)

Updated: 2023-04-21

As of 2016, individuals who sell their principal residence have to report the sale on their tax return. Reporting is required for sales that occurred on or after January 1, 2016.

If the property was the individual's principal residence for every year that they owned it, they will make the principal residence designation on Schedule 3 (S3).

• For 2016, a T2091 (or T1255 for a deceased client) is required for the designation in the case the property was not their principal residence for all of the years that they owned it.
• For 2017 onward, a T2091 (or T1255) must be completed for all dispositions of a principal residence, regardless of whether a taxable capital gain resulted from the sale, or not.

There are significant penalties for not reporting this sale. Please see the Canada Revenue Agency's page on Reporting the sale of your principal residence for individuals (other than trusts) for the latest information.

Principal Residence Question on the Info Worksheet

Each taxpayer is required to answer a question on the sale of principal residence in TaxCycle T1.

1. The question appears in the Filing section of the Info worksheet.
2. TaxCycle includes a review message to remind you to answer the question. This is a Quick Fix review message, so you can click the blue links to quickly answer the question.
3. Answer No if the taxpayer did not sell their principal residence during the year.
4. Answer Yes if the taxpayer sold the principal residence during the year. This triggers more review messages to help you complete the Principal residence section on page 3 of the Schedule 3 (S3).

Principal Residence Section on Schedule 3 (S3)

Once you answer Yes to the question on the Info worksheet, you are required to complete the Principal residence section on page 3 of the Schedule 3 (S3):

1. Enter the address details of the property or properties that were sold. This table expands as required to accommodate more properties. As you add a property, it adds another blank row for another property.
2. For each property, enter the Year of acquisition and Proceeds of disposition.
3. If required, indicate the percentage to share with the spouse, or with a third party.
4. Check the box to designate the property as the principal residence for all years, if applicable.
5. TaxCycle automatically creates the T2091/T1255 and populates it with the details entered on this page, as applicable. You must complete a T2091 (or T1255) for all dispositions of a principal residence, regardless of whether a taxable capital gain resulted from the sale, or not.
6. The boxes on line 179 below the table are automatically checked based on what you enter in the table.

Complete and File a T2091/T1255

1. When you complete the principal residence designation section of the S3 (see above), TaxCycle automatically creates the T2091/T1255 form and enters the address.
2. TaxCycle creates a T2091 by default. If the return is for a deceased taxpayer, TaxCycle creates a T1255.
3. If you delete a row from the table on the S3, the related T2091/T1255 is also deleted.
4. TaxCycle flows the proceeds of the disposition as entered on the S3. Enter the number of years that the property was designated as principal residence, the adjusted cost base at time of disposition, and other information required to complete the form.
   
5. You can have as many T2091/T1255 forms as are required, as this is a multi-copy form.
   
6. When you EFILE the tax return, certain information from the T2091, or T1255, is transmitted with the return. A paper copy should not be sent to the CRA unless they request to see the form.

Related Sections in Built-In Templates

• The 2015 and onward Post-season (PostSeason) letter contains a section to help you gather information on the sale of a principal residence from your clients.
• For 2016 and onward, the Pre-season (PreSeason) and Joint pre-season (JPreSeason) letters contain sections on the sale of principal residence.
• The 2016 and onward Engagement Letter (ELetter) includes a section explaining the requirement to report the sale of a principal residence.
• Sections in the Client Letter (CLetter) and Joint Client Letter (JLetter) inform your client(s) when a sale of principal residence has been reported on their tax return.