Brulé,
T.C.J.:—The
appeal
heard
in
Toronto,
Ontario,
on
January
27,
1987
is
against
an
income
tax
assessment
for
the
year
1984
in
which
the
Minister
of
National
Revenue
increased
the
reported
income
of
the
taxpayer
by
an
amount
of
$17,660
to
take
into
account
the
taxable
capital
gain
on
the
sale
by
the
appellant
of
a
2.1-acre
parcel
of
property.
It
was
the
position
of
the
Minister
that:
“.
.
.
no
amount
of
the
2.1
acres
of
land
disposed
of
in
the
1984
taxation
year
was
necessary
to
the
use
and
enjoyment
of
the
house
as
a
residence
.
.
.”.
Facts
The
appellant
purchased
a
four-acre
parcel
of
land
in
March
1979.
At
the
time
of
purchase
the
land
was
part
of
a
103-acre
property
zoned
agricultural.
The
purchased
parcel
was
not
legally
severed
at
that
time
but
was
physically
isolated
from
the
remainder
of
the
103-acre
property
except
on
the
203-foot
north
limit
of
the
parcel.
Four
months
after
the
appellant
purchased
his
property
a
plan
of
subdivision
for
the
remainder
of
the
103-acre
property
was
submitted
to
the
municipality
and
later
approved.
Under
this
plan
of
subdivision
the
appellant's
property
was
not
included
within
the
development's
limit
and
therefore
constituted
a
remnant
parcel
of
land.
Because
of
the
town's
zoning
policy
towards
remnant
parcels
of
land
the
appellant’s
property
retained
its
agricultural
zoning
even
after
the
subdivision
plan
had
been
approved.
In
April
1980
the
appellant
completed
construction
of
a
house
on
the
southern
portion
of
his
property
which
he
occupied
as
his
principal
residence.
In
1981
the
Appellant's
property
was
legally
severed
from
the
remaining
portion
of
the
103
acre
property.
In
1984
the
appellant
applied
for
and
obtained
rezoning
and
subdivision
of
his
property
and
sold
the
northern
2.1
acres
of
his
four-acre
property
at
a
gain
of
$176,605.35.
The
zoning
By-Law
which
applied
to
the
appellant’s
property
from
the
time
of
purchase
until
1984
required
a
minimum
of
25
acres
of
land
for
residential
use
in
an
area
zoned
agricultural.
The
water
supply
at
the
appellant’s
residence
was
originally
supplied
by
a
well
near
the
house
on
the
southern
portion
of
the
property.
After
a
few
months
of
use
this
well
proved
unsatisfactory
and
a
second
well
was
drilled,
this
time
in
the
northern
portion
of
the
property.
Because
the
second
well
also
proved
unsatisfactory
it
was
necessary
to
augment
the
water
supply
to
retain
a
water
delivery
service
and
to
sometimes
rely
on
the
facilites
of
neighbours
until
the
residence
was
linked
by
the
appellant
to
the
town's
|
water
supply
in
1982.
|
|
|
Issue
|
issue
|
The
point
at
issue
is
whether
the
disposition
of
2.1
acres
of
the
appellant’s
four-acre
property
resulted
in
a
taxable
capital
gain.
It
must
therefore
be
determined
if
the
appellant
has
established
that
the
2.1
acres
sold
were
necessary
for
the
use
and
enjoyment
of
his
principal
residence
and
for
that
reason
were
exempt
from
capital
gain.
Analysis
Paragraph
54(g)
of
the
Income
Tax
Act
gives
the
definition
of
principal
residence.
The
pertinent
part
of
the
section
reads
as
follows:
“..
.
principal
residence”
...
means
a
housing
unit,..
.
and
.
.
.
“principal
residence”
.
.
.
shall
be
deemed
to
include
.
.
.
the
land
subjacent
to
the
housing
unit
and
such
portion
of
any
immediately
contiguous
land
as
may
reasonably
be
regarded
as
contributing
to
the
taxpayer’s
use
and
enjoyment
of
the
housing
unit
as
a
residence,
except
that
where
the
total
area
of
the
subjacent
land
and
of
that
portion
exceeds
/2
hectare,
the
excess
shall
be
deemed
not
to
have
contributed
to
the
individual’s
use
and
enjoyment
of
the
housing
unit
as
a
residence
unless
the
taxpayer
establishes
that
it
was
necessary
to
such
use
and
enjoyment.
The
parties
referred
to
the
following
cases
at
law:
1.
Elmo
B.
Baird
v.
M.N.R.,
[1983]
C.T.C.
2
651;
83
D.T.C.
582.
2.
Donald
Fraser
v.
M.N.R.,
[1983]
C.T.C.
2522;
83
D.T.C.
448.
3.
The
Queen
v.
William
Yates,
[1983]
C.T.C.
105;
83
D.T.C.
5158
(F.C.T.D.).
The
Queen
v.
William
&
May
Yates,
[1986]
2
C.T.C.
46;
86
D.T.C.
6296
(F.C.A.).
4.
Stan
Michael
v.
M.N.R.,
[1985]
2
C.T.C.
2122;
85
D.T.C.
455.
5.
Beatrice
N.
Cox
&
Robert
J.
Cox
v.
M.N.R.,
[1985]
1
C.T.C.
2392;
85
D.T.C.
320.
6.
Carl
Rudeloff
v.
M.N.R.,
[1984]
C.T.C.
2674;
84
D.T.C.
1548.
7.
Eric
Rode
&
Elizabeth
Rode
v.
M.N.R.,
[1985]
1
C.T.C.
2324;
85
D.T.C.
272.
8.
Sidney
K.
Watson
&
Thelma
Watson
v.
M.N.R.,
[1985]
1
C.T.C.
2276;
85
D.T.C.
270.
9.
The
Estate
of
Sarah
Isabell
Raper
v.
M.N.R.,
[1986]
2
C.T.C.
2052;
86
D.T.C.
1513.
At
first
glance
the
case
at
bar
might
offer
certain
similarities
with
the
Yates
case
referred
to
above.
The
substance
of
that
decision
was
that,
since
the
taxpayer
could
not
legally
have
occupied
his
housing
unit
on
less
than
ten
acres
because
of
zoning
regulation
requirements,
the
portion
of
land
in
excess
of
one
acre
was
necessary
for
the
use
and
enjoyment
of
his
residence.
The
present
case
must
however
be
distinguished
from
the
Yates
decision
in
which
the
taxpayer
conformed
to
existing
zoning
by-law
requirements
at
the
time
he
began
to
occupy
his
residence.
In
the
case
at
bar,
when
the
housing
unit
was
built,
the
four
acres
of
land
constituted
a
remnant
parcel
under
a
plan
of
subdivision
submitted
to
the
town
in
1979.
Although
the
zoning
regulations
required
a
minimum
of
25
acres
for
residential
use
in
an
area
zoned
agricultural,
it
had
been
in
the
taxpayer's
own
words:
..
.
the
policy
of
the
town
.
.
.
to
make
an
exception
to
recognize
a
residual
parcel
of
land
when
it
re-zones
the
balance
of
the
land
as
a
subdivision”.
Because
at
the
time
the
housing
unit
was
built,
the
four-acre
property
constituted,
under
the
plan
of
subdivision,
a
remnant
parcel
which
did
not
conform
to
minimum
zoning
requirements,
the
Yates
case
can
be
of
no
use
in
deciding
the
present
issue.
Having
determined
that
under
the
plan
of
subdivision
the
appellant
could
build
his
home
on
the
four-acre
property
despite
the
25
acre
agricultural
zoning
requirement,
the
Court
cannot
accept
the
argument
that
the
same
agricultural
zoning
requirements
make
it
impossible
for
the
appellant
to
occupy
his
home
on
less
than
four
acres.
The
appellant
argued
that
the
2.1
acres
sold
were
necessary
to
the
use
and
enjoyment
of
his
residence
because
they
provided
well
prospects
that
might
have
provided
the
water
needed
for
the
appellant's
domestic
use.
I
would
refer
to
Associate
Chief
Judge
Christie’s
comments
in
Rode
v.
M.N.R.,
[1985]
1
C.T.C.
2324
at
2326-27;
85
D.T.C.
272,
at
page
274:
Parliament
has
placed
two
things
together
contraposed.
First,
provision
for
the
determination
of
variable
dimensions
of
land
which
may
constitute
the
principal
residence
of
taxpayers
in
respect
of
which
they
can
succeed
in
what
they
contend
is
the
correct
dimension
by
meeting
the
application
of
a
flexible
test.
This
applies
to
an
area
which
has
fixed
lines
of
demarcation
which
must
not
exceed
one
acre.
Second,
provision
for
the
determination
of
variable
dimensions
of
land
which
may
constitute
the
principal
residence
of
taxpayers
which
are
in
excess
of
one
acre
and
which
have
no
fixed
outer
limits.
I
believe
that
in
this
regard
it
was
the
intention
of
Parliament
that
crossing
the
demarcation
lines
of
one
acre
and
the
process
of
expansion
beyond
them
shall
be
a
formidable
task.
This
is
the
effect
of
the
injection
of
the
word
“necessary”
in
determining
dimensions
in
excess
of
one
acre.
Among
the
interpretations
assigned
to
the
word
“necessary”
in
determining
dimenions
in
excess
of
one
acre.
Among
the
interpretations
assigned
to
the
word
“necessary”
in
the
Oxford
English
Dictionary
is:
“Indispensable,
requisite,
essential,
needful;
that
cannot
be
done
without”.
From
this
selection
I
believe
that
the
phrase
“that
cannot
be
done
without”
best
epitomizes
what
a
taxpayer
must
meet
in
order
to
establish
that
his
principal
residence
can
properly
be
regarded
as
greater
than
one
acre.
To
my
mind,
the
proper
approach
to
the
determination
of
these
appeals
is
to
objectively
consider
all
of
the
relevant
circumstances
adduced
in
evidence
which
were
in
existence
immediately
prior
to
the
disposition
of
the
property
and
in
the
light
of
that
answer
this
question:
have
the
appellants
established
on
a
balance
of
probabilities
that
without
the
area
of
land
which
they
contend
constitutes
the
subjacent
and
immediately
contiguous
land
component
of
their
housing
unit
they
could
not
practicably
have
used
and
enjoyed
the
unit
as
a
residence?
I
say
“immediately
prior
to
the
disposition"
because
"the
critical
time
is
the
moment
before
disposition":
The
Queen
v.
Yates,
[1983]
C.T.C.
105
at
106;
83
D.T.C.
5158
at
5159.”
[Emphasis
added.]
Could
the
appellant
"do
without”
the
2.1
acres?
The
report
produced
by
the
appellant’s
expert
witness,
a
hydrologist,
indicates
on
page
3
that
because
of
insufficient
output
and
siltation,
both
wells
were
abandoned
shortly
after
their
completion.
The
second
well,
situated
on
the
2.1
acres,
could
therefore
not
be
said
to
be
necessary
to
the
taxpayer's
use
and
enjoyment.
The
mere
fact
that
a
water
supply
might
exist
on
the
property
in
question
cannot
be
said
to
render
this
parcel
necessary
to
the
use
and
enjoyment
of
the
residence
when,
in
fact
the
appellant
enjoyed
his
principal
residence,
from
the
time
of
purchase
to
the
time
of
sale,
without
actually
making
use
of
the
property.
The
appellant
did
indeed
“‘do
without”
the
2.1
acres
while
using
and
enjoying
his
residence.
For
these
reasons
the
appeal
must
fail.
The
appeal
is
dismissed.
Appeal
dismissed.
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