25 March 2021 CBA Commodity Taxes Roundtable, Q.12

An individual (A) purchased a property in trust with other individuals including her husband (B), for development as a condominium complex. On completion of construction, A and B took title to two of the units (Units 1 and 2) jointly, with a view to using the two units functionally as a single place of residence (with sleeping quarters in one unit and living quarters in the other) - and (“Fact 5”) the units 1 and 2 will not be used for any other purpose between the time of construction and A and B moving in, and no ITCs will be claimed on the construction of the units.

After noting uncertainties as to whether the two units constituted two, or a single, residential complex, and a single place of residence, CRA stated:

If each of Unit 1 and Unit 2 is a residential complex, and if each of A and B is a builder of each unit, then both A and B are subject to the self-supply rules of subsection 191(1) of the ETA. However, as long as a builder of the residential complex, whether it is A or B, or a related person (recall A and B are related as spouses) uses the unit primarily as a place of residence, and otherwise satisfies the conditions of subsection 191(5) of the ETA, they will be excluded from having to make a self-supply under any of subsections 191(1) to (4).

In other words, for each unit that qualifies as a residential complex, if either A, B, or both A and B uses the unit primarily as a place of residence, both A and B as builders and owners of the unit will be excluded from having to make a self-supply under any of subsections 191(1) to (4) of the ETA per virtue of the personal use exception of subsection 191(5), provided they meet all the other requirements at paragraphs (a) to (d).

In that regard, while Fact 5 provides an indication that the condition of paragraph 191(5)(c) of the ETA is met, under certain circumstances, this may not be the case, particularly if there is partitioning of the builders’ undivided interest in the real property or condominium units prior to possession of the units by the builders. …

If A and B are not builders of a residential complex because of paragraph (f) of the definition of “builder” … they will not be subject to the self-supply rules in any of subsections 191(1) to (4), and accordingly, they will not be subject to the personal use exception in subsection 191(5).

A couple (A and B) along with others purchased a property in trust for development as a condominium complex. On completion of construction, A and B took title to two of the units jointly, with a view to using them (as the first occupants) functionally as a single place of residence (with sleeping quarters in one unit and living quarters in the other).

After noting uncertainties as to whether the two units constituted two, or a single, residential complex and place of residence, CRA noted that even if each was a residential complex (and each of A and B, a builder) then the personal use exception in s. 191(5) to the self-supply rule in s. 191(1) would apply to each unit if either A or B, or both A and B, used the unit primarily as a place of residence.

CRA did not discuss the income tax jurisprudence (e.g., Salama and Boulet) as to whether duplex units or basement apartments are separate residences.