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: Principal Residence - Land in excess of 1/2 hectare including whether excess is necessary to the use and enjoyment of the housing unit as a residence as a result of a particular lifestyle
Position: Law generally explained (As a result of the decision in Eric and Elizabeth Rode v. MNR (1985 DTC 272) - a particular lifestyle does not mean that excess land is necessary)
Reasons: Specific facts and documentation not available -
XXXXXXXXXX 972578
M. Eisner
February 24, 1998
Dear XXXXXXXXXX:
Re: Principal Residence Exemption
This is in reply to your letter of September 9, 1997 concerning the above noted subject. We apologize for the delay in replying.
In you letter, you have indicated that, in 1952, you and your wife purchased approximately 4 acres of land in the country for the construction of your residence as you and your wife did not want to live in an urban setting. Twenty years later, a larger house was needed as you had 4 children. In 1972, you sold the residence along with approximately 1/2 acre of land and proceeded to have a new home built on the remaining part of the land originally purchased. As a result of creeks running across the land, you had to purchase a great deal of fill and construct a bridge. You have indicated that you consider this land to be one lot that cannot be separated. As you and your wife now wish to sell the remaining land and the home built in 1972 and then move into a smaller residence, you have asked us whether you can claim the principal residence exemption in respect of the land which is approximately 3.44 acres.
Our Comments
We are unable to provide an advance income tax ruling as the central question involves a finding of fact and all the relevant facts would have to be reviewed after the transactions are completed. However, we offer the following general comments.
The definition of “principal residence” in section 54 of the Income Tax Act provides that where the total area of the contiguous land upon which a housing unit is situated, exceeds 1/2 hectare, the excess land is considered not to have contributed to the use and enjoyment of the housing unit as a principal residence, unless it can be established that the taxpayer establishes that it was necessary for such use and enjoyment. The onus is on the taxpayer to demonstrate that aspect.
As indicated in paragraph 21 of Interpretation Bulletin of Interpretation Bulletin IT-120R4 “Principal Residence”, which has been enclosed, severance restrictions may be relevant in determining whether land in excess 1/2 hectare is necessary to the use and enjoyment of a residence. In addition, paragraph 22 of IT-120R4 indicates that a legally imposed minimum lot size exceeding 1/2 hectare at the time of acquisition, which is zoned as being residential, is generally considered to be the minimum amount of land necessary for the use and enjoyment of the housing unit as a residence throughout the period that the property is continuously owned by the individual after that acquisition date. You may also refer to other comments set out in paragraph 21 of that bulletin. As a further comment, it is our general view that the fact that an individual makes use of more than 1/2 hectare of land in connection with a particular lifestyle does not, in itself, mean that it is necessary to the use and enjoyment of the housing unit as a residence.
In summary, it is a question of fact as to how much, if any, of the excess land is necessary for the use and enjoyment of the housing as a residence.
We trust that our comments will be of assistance to you.
Your photographs have been enclosed.
Yours truly,
John F. Oulton
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
