Principal Issues: 1. Whether a part-year would count as a year in term B of the principal residence exemption formula contained in paragraph 40(2)(b) of the Act? 2. Whether the filing of a subsection 45(2) election form would make a difference as to whether a part-year would count as a year in term B of the principal residence exemption? 3. Whether the ownership of the principal residence would make a difference as to whether a part-year would count as a year in term B of the principal residence exemption?
Position: 1. Yes. 2. No. 3. No.
Reasons: 1. If the taxpayer was resident in Canada any time in the year (and not necessarily for the whole of the year), the year would count as taxation year for which the property was the taxpayer's principal residence. 2 & 3. As long as the Canadian property meets the definition of a "principal residence" in section 54, then the taxpayer's residence is the only factor that affects whether a part-year is counted as a year in term B of the formula in paragraph 40(2)(b).
XXXXXXXXXX 2010-035763
T. Elsey
June 4, 2010