Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Whether an elderly widow can be considered to ordinarily inhabit her principal residence as required by the definition in section 54 in circumstances where she goes into a nursing home as a result of illness and rents her home for an indeterminate period.
Position:
If she goes into the nursing home on a temporary basis, it is likely that she could be considered to ordinarily inhabit her residence. On the other hand, if her stay in a nursing home is permanent, she would not meet the test. Also, the change in use rules in paragraph 45(1)(a) and the election under section 45(2) should be considered.
Reasons:
The issue involves a question of fact.
961234
XXXXXXXXXX M. Eisner
Attention: XXXXXXXXXX
June 7, 1996
Dear Sirs:
Re: Principal Residence Exemption
This is in reply to your letter of March 29, 1996, concerning the above-noted subject.
You have described a hypothetical situation in which Mrs. A (an elderly widow) has recently moved from her residence to a nursing home as she was unable to care for herself. Mrs. A lived in the residence for several years. It is unknown whether she will be able to return to her home at some future date.
Mrs. A's children do not wish to sell the residence at this time. In order to ensure that the residence is properly maintained, the children found a temporary unrelated tenant for Mrs. A's home. The tenant shares some of the costs in respect of the residence including utilities, property taxes, insurance and maintenance. Mrs. A would bear the cost of all major repairs.
In order for Mrs. A to designate the property in question as her principal residence, it is our view that it will be necessary for her to satisfy the "ordinarily inhabited" requirement in paragraph (a) of the definition of "principal residence" in section 54 of the Income Tax Act (the Act).
The issue of whether or not Mrs. A ordinarily inhabited the residence while she was in the nursing home throughout a year as a result of her illness is a question of fact. If her stay at the nursing home could be regarded as being temporary with respect to a particular year, it is likely that the "ordinarily inhabited" requirement would be satisfied for that year. On the other hand, if she were placed in the nursing home on a permanent basis, it is our view that the "ordinarily inhabited" requirement would likely not be satisfied. Further comments on the meaning of "ordinarily inhabited" are set out in paragraph 12 of Interpretation Bulletin IT-120R4.
As a result of the arrangement between Mrs. A and the tenant, another aspect to consider is whether or not the change in use rules in paragraph 45(1)(a) of the Act would apply. If her residence has been converted to an income-producing use, then, in our view, the rules in paragraph 45(1)(a) of the Act would apply.
If there has been a factual change in use of Mrs. A's principal residence, she can make an election under subsection 45(2) of the Act. While such an election is in effect, she is able to designate the property as her principal residence for up to four years. General comments in this regard, are set out in paragraphs 31 to 33 of Interpretation Bulletin IT-120R4.
As it appears that the situation set out above relates to an actual fact situation, you may wish to make a submission to your local tax services office for further clarification.
We trust you will find the foregoing satisfactory.
Yours truly,
John F. Oulton
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1996
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1996
Email this Content