Question: “We are currently non-residents of Canada but own property in Canada that we rent have rented out to a third party. The tenants have recently vacated the property and we are doing some minor repairs as we plan on taking up residence in Canada again in 2009 and will occupy this property. How long do we need to live in the property to avoid capital gains upon the sale? It is our principal and only property.”
When you left Canada , you should have undergone a deemed disposition to calculate the departure tax. Essentially, you would have been deemed to have sold all property immediately before you ceased to be a resident of Canada for tax purposes.
When you left, the house would have been a principal residence and not subject to capital gains. Upon your return to Canada, and if you move into the property in question, the property will again be considered your principal residence. Upon resale, there would no taxable gains. The general rule is that you can claim the principal residence exemption for one residence in any given year. There is no specific holding period.
I should note for the benefit of other readers that immigration to & emigration from Canada can have unintended tax issues and it would be wise to seek professional advice from someone competent in these matters.