If you have a cottage, you have a tax problem waiting to happen. By definition, the word cottage suggests that you have another property somewhere that is your principal residence. So when you sell the cottage, if there is a gain, then you will have to pay tax on that gain. A family only has one principal residence.
The best way to avoid paying too much tax when you sell the cottage is to make sure that you can document any of money you have spent on the cottage. Did you pave the driveway, dig a well or put on an addition? If so, then you can add those costs to the cost of the property and the gain on sale will be less.
So, as you are sitting around the cottage this summer make a list of the improvements you have made and see if you can find the receipts. Then you can do an estimate of how much your gain will be, which will give you a better idea of how much money you will have left over after you sell the cottage.
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