If you already have a cottage in the family, there may be looming ownership, tax, and estate-planning problems if you’re thinking of selling or transferring to a new generation. Here are the three top issues to be aware of whether you already own a vacation property or you’re contemplating buying one.
1. Your tax partner
All cottage owners have a silent partner—the Canada Revenue Agency. That’s because of something called the “principal residence exemption.”A principal residence is a dwelling that someone ordinarily inhabits at some point during the year. That can include a vacation property. Effectively, it means you don’t pay capital gains tax when you sell the property you designate as your principal residence.
