Sale of principal residence capital gain math seems to be broken. I set my ACB to be the same as the proceeds and it says I have $16,000 in capital gains. What?

[david-j-parker]

I got suspicious when my manual calculation of capital gains from using CRA's form T2091(Ind) gave me a capital gain of $3500, then TurboTax said it was $16,000. So I ran the test where I set the ACB to match the proceeds and it didn't give me a zero capital gain as the answer. I don't understand what math Turbotax is doing. It is assigning me a big capital gain that doesn't exist. Am I missing something?

[david-j-parker]

So, I set my house proceeds to be $100 and my ACB to be $100, so property bought and sold for the same value (zero capital gains). Then I said I lived in the house for 1 year and owned it for 10 (so, a rental for 9 years). It spit out that I had a capital gain of $40. So, for a house that didn't go up in value at all for 10 years, TurboTax is assigning 40% of the sale price as capital gains. If you change the number of years the house was a rental, the % of capital gains it assigns goes down until you hit 9 years personal property and 1 year rental, when it assigns zero capital gains.  I don't get it.

[TurboTaxGinette]

In order to help you with this situation, we believe your best option is to contact our telephone support team for further assistance, as they have the option to view your screen to help resolve the issue. To contact them, please follow this link: Contact Us. 

​​​​​​​Thank you for choosing TurboTax.

[david-j-parker]

Hi Ginette,

I have already done this (called support). I talked to someone who was only able to check to see if I had properly filled in the boxes on the screen. She didn't know what math TurboTax was using and she couldn't explain why Turbotax was spitting out capital gains when given an equal purchase and sale price. She suggested that I needed to pay for expert tax advice, which I don't. I understand the tax. I don't understand what TurboTax is doing.  I was hoping the forum might be more helpful.

Is there some way I can see what math Turbotax is doing in the background? That way I'll be able to see what the difference is between TurboTax's math, and the CRA forms that are supposed to do the same thing.

[TurboTaxBrenda]

We would like to assist you. First we will need to know which TurboTax software you are using- if Online or Desktop version? 

[david-j-parker]

Online version.

[TurboTaxBrenda]

We have tried to replicate your issue, but can't get what you are getting. Can  you please let us know exactly where you are at on your return- so that we can be sure to replicate your issue. Which year did you live in this house as your principal residence?

[david-j-parker]

Hi Brenda,

Interestingly, I just started a completely clean tax return - from scratch, as if I were a newborn baby. I then told Turbotax that the only thing I did in 2023 was sell my house (no income, no nothing). I then went to the sale of principal residence section, put in all my details for my house, and it spit out exactly the right answer that I was expecting - the same answer I got by filling out CRA's form T2091(Ind) manually.

So, there is something about my previous tax situation or the data I have put into other areas of my 2023 return which are affecting how TurboTax is calculating my capital gains from selling our house. Which is weird, since it should be a stand-alone calculation, as far as I understand (and clearly there is something I am not understanding).

To answer your question, we bought the property in 2014. It was rented from the summer of 2015 to the summer of 2018 when we moved back into it, then we sold it in 2023. So, We owned it for 9 years and lived in it for 6. CRA lets you claim the year you moved out as a principal residence year, so that means we can claim the personal residence exemption for 7 of the 9 years.

[TurboTaxBrenda]

Okay, well we are happy to hear that you got everything working properly. 

Happy Filing!

[david-j-parker]

No, everything is not working properly. I have now played around with it in more ways and found it even weirder.

If I pretend that our house was two different houses, each worth half as much as our actual house is worth. I own 100% of the half house and my wife owns 100% of her half house, and we input them as two separate properties (but with the same address), it does the math correctly and gives the correct capital gain.

If fill in the page as a joint property, with 50% valuations to each of us and with our shares of the ACB input accordingly, it assigns a $33,000 capital gain to each of us. It should be ~$3500.

Anyways. I'll submit it as two distinct properties (with the same address....) to make the math work correctly, but something very odd is happening with the math when I try to make it a joint property.