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45(3) Form tax assistance

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For tax purposes, property can be treated in several ways. Property can be capital property or inventory. Property can also be personal property or business property. The same property can change from being capital property to inventory, or from personal property to business property, and back, depending on the circumstances. This can apply to property that is a personal residence or could be used as a principal residence.

When a person starts using property that was once used to gain or produce income (business use) for personal purposes, making it their principal residence, then the property is deemed (pretended) disposed. This can be a taxable event and put the taxpayer in a tax crunch – no property sold or cash received, but taxes are due.

To help taxpayer’s out, when a housing unit that was once used to gain or produce income is then used by the owner as his or her principal residence, an election can be filed under subsection 45(3). Where the taxpayer files an election with the CRA, then the property is deemed not to have been disposed and taxes are not due until the taxpayer actually sells the property. The election takes the form of a letter to the CRA, usually filed with the taxpayer’s tax return for the year in which the property is actually sold.

This election cannot be made, however, if Capital Cost Allowance has been deducted for the property.

Chartered Professional Accountant in Canada, U.S. and U.K.


Sam Faris reduced the significant unreported income based on net worth audit to be nil. Sam’s approach in fighting these types of complex audits is unique and sophisticated. He found countless mistakes made by the auditor which were rectified when Sam appealed the audit decision. Instead of owing significant amount of taxes, Sam reduced it to zero. I highly recommend to hire Sam for this type of audits and any CRA problem.”

E.M., Ottawa

Pro Tip


The Small Business Deduction gives businesses a tax deduction on the first $500,000 of income. This saves an eligible corporation around up to $50,000 in income taxes. There are a number of conditions that have to be met to be eligible for this deduction.