Principal Residence Designation Since 1998, Petumala Fluffy has owned a residence in Kelowna, British Columbia. It was...

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Accounting

Principal Residence Designation
Since 1998, Petumala Fluffy has owned a residence in Kelowna,British Columbia. It was acquired in that year at a cost of$623,000.
In 2006, Petumala was appointed to the Senate and, because ofthe significant amount of time that she was required to be presentin Ottawa, she acquired a second residence in that city. The costof this residence was $426,000. In each of the subsequent years,she spent some time at each residence.
In 2017, following allegations that she had claimed and doubleclaimed completely inappropriate travel costs, she resigned fromthe Senate. As this created severe financial difficulties (amongother problems), she sold both residences and moved in with hermother. The Kelowna house sold for $897,000, while the Ottawa homesold for $534,000. These amounts are net of all real estatefees.
Ms. Fluffy would like to minimize any capital gain that arisesas the result of selling the two properties.
Required: Describe how the residences should bedesignated in order to accomplish Ms. Petumala’s goal. In addition,calculate the total amount of the gain that would arise under thedesignation that you have recommended.

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Principal Residence Designation Which can be used to eliminate or reduce capital gains araising out of sale of house Generally home which is strictly used for residence purpose will qualify to claim Principal residence ExemptionAnd person or hisher family members have to be lived in that home for some period If the house aquired to generate income See Answer

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Principal Residence DesignationSince 1998, Petumala Fluffy has owned a residence in Kelowna,British Columbia. It was acquired in that year at a cost of$623,000.In 2006, Petumala was appointed to the Senate and, because ofthe significant amount of time that she was required to be presentin Ottawa, she acquired a second residence in that city. The costof this residence was $426,000. In each of the subsequent years,she spent some time at each residence.In 2017, following allegations that she had claimed and doubleclaimed completely inappropriate travel costs, she resigned fromthe Senate. As this created severe financial difficulties (amongother problems), she sold both residences and moved in with hermother. The Kelowna house sold for $897,000, while the Ottawa homesold for $534,000. These amounts are net of all real estatefees.Ms. Fluffy would like to minimize any capital gain that arisesas the result of selling the two properties.Required: Describe how the residences should bedesignated in order to accomplish Ms. Petumala’s goal. In addition,calculate the total amount of the gain that would arise under thedesignation that you have recommended.