Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: 1. Does a portion of land qualify for the principal residence exemption
Position: 1. No
Reasons: 1. Excess land is not necessary for the use and enjoyment as a principal residence
XXXXXXXXXX
2011-041601
Robert Dubis
November 22, 2011
Dear XXXXXXXXXX :
We are replying to your letter of July 14, 2011 requesting a technical interpretation regarding the application of the principal residence exemption to a proposed disposition of vacant land by your client.
Your letter states that an individual owned a large property consisting of several hectares that was subdivided into two lots. One lot included the house and land and the second lot consisted only of vacant land. The client disposed of the house and claimed a principal residence exemption in respect of that disposition.
You are requesting our views as to whether an additional portion of the remaining vacant land can be considered to have been essential to the use and enjoyment of the house as a principal residence such that a portion of any future capital gain on the disposition of the second lot could also be eligible for the principal residence exemption.
Whether a particular property meets the requirements of the definition of "principal residence" in section 54 of the Act is a question of fact. It appears that zoning bylaws permitted a subdivision of the property in such a manner that house was in fact sold without the additional portion of land. In our view, the fact that the house could be sold without the additional portion of the remaining land is proof that the additional portion was not necessary for the use and enjoyment as a principal residence.
We trust that the information provided is helpful.
Yours truly,
Sharmini Ratnasingham
Assistant Director
for Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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