It seems these days there is always a new draw or contest to win a big ticket item such as a Dream Home. I've always wondered just what would happen if I were to win that Dream Home. Do you have to pay taxes on the new home? What would happen with my current home? I decided to ask my accountant friends down at Cornish Harder Niederle LLP to find out and here's what they had to say:
"Lottery winnings are not taxable, and are not required to be reported in your income per CRA. However, what happens when you win a house and are trying to decide if you want to sell your current house and move into the prize house; or if you want to just sell the prize house and stay in your currently owned residence?
If you decide you want to sell your current house and move into the one you won, then you would be able to claim the principal residence exemption on your current house when it is sold, and then would have the principal residence exemption available on the prize house when you move in to it. Keep in mind that the principal residence exemption is only available on one residence during a tax year.
If you decide to stay in your currently owned home and sell the prize house, then this becomes a taxable transaction. The cost of the prize house is whatever the fair market value of the home is at the time it is won. You would be able to deduct the costs you incur (legal and realtor fees) for selling the home against the proceeds on the sale, and then the difference between the cost of the home and the net proceeds would either be a capital gain or capital loss.
In either case, it is best to consult with your accountant to fully understand the consequences for your specific situation."
CORNISH HARDER NIEDERLE LLP | www.chnllp.com
T: 403.309.5865 | F: 403.347.6645
So there you have it! Thanks Cornish Harder Niederle!
Consider it Done!