Humber/Ontario Real Estate Course 1 Exam Practice

How many principal residences can an Ontario taxpayer claim at one time?

1. No more than two principal residences

2. One principal residence for taxation purposes

3. Up to three principal residences

4. Two principal residences owned by the same family unit

5. Unlimited if they are used for different seasons

6. One primary and one secondary residence

The correct answer is: One principal residence for taxation purposes

A taxpayer in Ontario can claim only one principal residence for taxation purposes at any given time. This definition is significant as it impacts the eligibility for the principal residence exemption, which is a tax benefit that allows individuals to potentially exclude any capital gains earned on the sale of their primary home from being taxed. While it's possible for a taxpayer to own multiple properties, only one of those can be designated as the principal residence in a single tax year. This ensures clarity in tax reporting and aligns with the intention of tax policies that aim to support homeownership without allowing excessive benefits from multiple residential claims. The other options may seem plausible but do not align with the established rules for claiming a principal residence. For instance, the idea of claiming two principal residences is generally not permitted as it could lead to tax avoidance. Similarly, suggesting that multiple residences can be claimed based on usage for different seasons or family ownership does not conform to the tax regulation that restricts the claim to just one principal residence.