CRA finds that a non-severable parcel of land could not have two beneficial owners of the principal residence and business portions thereof

An individual owning a parcel of farming land that cannot be legally severed would like to transfer the farming portion of the property to a wholly-owned corporation, while retaining beneficial ownership of the farmhouse. In finding that the individual would not be able to claim the principal residence exemption on a subsequent sale by the corporation of this parcel, CRA stated:

[T]he essential rights of ownership of a property used as an individual’s principal residence cannot be transferred or retained separate from the ownership of the rest of the property because the individual does not retain the right of alienation (that is, the ability to transfer the property).

Similar issues can arise in other contexts, for example, where a corporation holding non-severable real estate would like to sell the building to a 3rd-party purchaser directly and the land “through” an affiliate with net capital losses.

Neal Armstrong. Summary of 21 June 2017 External T.I. 2017-0687961E5 under s. 54 – principal residence.