April 6, 2013
Some rule and reporting changes to the principal residence exemption were announced October 3.
If your entire gain is covered by the PRE [principal residence exemption], I had noted above that you are not required to file the designation form with your tax return [under previous rules] to report the disposition of the principal residence. Under the new rules, however, you are now required to report the sale of your principal residence and make the designation; this applies for all dispositions that occur on or after January 1, 2016. If you fail to do so, the CRA will accept a late principal residence exemption exception in certain circumstances, but you could be subject to a penalty of up to $8,000.
And under the current rules, CRA can only reassess you beyond the normal reassessment period, which is generally three years after the date of the original notice of assessment. The proposed rules clarify that the CRA has the ability to reassess you beyond the normal reassessment period (as it relates to your principal residence) if you do not report the disposition of your principal residence.