Spouse A owns two residences:

Both spouses have resided in both homes since 2004. In 2011, Spouse A transferred Residence 2 to Spouse B as a gift. Spouse B sold the transferred residence in 2016 for $300,000. Spouse A has not designated, at any time. Residence 2 as his principal residence.

REQUIRED
(1) Compute the effect of the above transaction as if subsection 40(4) did not exist.
(2) Apply subsection 40(4) to the transaction.
(3) Apply subsection 40(4) to the transaction on the assumption that spouse A had previously designated Residence 2 for two years.

Transcribed Image Text:

FMV ACB Year of acquisition Residence 1 $100,000 $ 50,000 2004 Residence 2 $200,000 $100,000 2004