Principal Issues: Contract signed to buy a condo unit before construction started, intended as principal residence. Prior to completion, intention changed and taxpayer intends to rent it out. In this situation, is the no-change-in-use election available to the taxpayer under subsection 45(2)?
Position: No.
Reasons: The condo unit would not meet the definition of a "principal residence" under section 54 for the year 2005, and could not be designated as such because it will not have been ordinarily inhabited in the year by the taxpayer, or a family member (i.e., spouse or common-law partner, former spouse or common-law partner or a child of the taxpayer).
At the time the property begins to be used as an income producing property, it will not have previously been used as a principal residence by any persons mentioned above. In this situation, subparagraph 45(1)(a)(i) will not be triggered to deem a disposition of the property and the subsection 45(2) no-change-in-use election would be inapplicable.
Reverse situation: If at a later time, the taxpayer were to move into the condo unit, changing its use from income producing to his principal residence, then at that later time, an election under 45(3) may be available to the taxpayer, to defer the deemed disposition that would otherwise occur as a result of the change of use to a principal residence by virtue of subparagraph 45(1)(a)(ii), subject to the provisions of subsection 45(4)