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:
To which extent does the principal residence exemption apply to a property which changed in use in 1988, from income-producing to principal residence, and was subsequently sold in 1996?
Position TAKEN:
Taxpayer referred back to TSO.
Reasons FOR POSITION TAKEN:
This situation involves completed transactions which have been the subject of a review by the Verification and Enforcement Division of a tax services office.
In any event, insufficient information was provided for us to determine to which extent the principal residence exemption could apply in relation to the above property.
XXXXXXXXXX 5-982530
M. Azzi
November 30, 1998
Dear Sir/Madam:
Re: Principal Residence Exemption
This is in reply to your letter of September 22, 1998, wherein you requested our views on the application of the principal residence exemption in regards to a property which you sold in 1996. You indicate that you completely changed the use of the property in 1988 from income-producing (i.e., rental property) to principal residence. You have noted that the Verification and Enforcement Division of the Toronto Tax Services Office has reviewed your claim and does not agree with the amount of principal residence exemption you have claimed.
Written confirmation of the tax implications inherent in particular transactions are given by this directorate only where the transactions are proposed and are the subject matter of an advance ruling request. Where the particular transactions are completed, the enquiry should be addressed to the relevant tax services office. As the situation outlined in your letter involves completed transactions which have been the subject of a review by a tax services office, your concerns, or any appeal of the decision of the tax services office, should have been addressed to that tax services office. We are therefore are not in a position to comment on your situation.
Notwithstanding the previous paragraph, we would also note that we could not have, nonetheless, provided you with our views on the application of the principal residence exemption in relation to the above-noted property, as we were not provided with sufficient information in order to make this determination. Such a determination is a question of fact which requires a review of all the relevant facts of each particular case. For instance, as regards to your particular situation, it is unclear whether you filed an election under subsection 45(3) of the Income Tax Act with respect to the change in use (as explained in paragraphs 34 and 35 of Interpretation Bulletin IT-120R4, which we understand you already have), which years, if any, you would have claimed capital cost allowance on the property when it was a rental property, whether you were a Canadian resident during each year for which you are claiming the principal residence exemption, and whether you or any member of your family unit (see paragraph 6 of IT-120R4) has designated any other property as a principal residence for any relevant year.
Should you have any further questions regarding the above matters, we suggest that you contact officials from the tax services office which reviewed your claim. They are in a better position to review all the facts of your case, and can explain any appeals options available to you, should you still not agree with their decision. We would be glad to provide assistance to the tax services office should they so request.
Yours truly,
Jim Wilson
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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