2 August 1994 External T.I. 9409435 - PRINCIPAL RESIDENCE EXEMPTION

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Does entire parcel of land on which principal residence is located qualify for the principal residence exemption in calculation of the taxable capital gain?

Position TAKEN:

Question of Fact.

Reasons FOR POSITION TAKEN:

Unable to give definitive reply with limited information received.

		940943
XXXXXXXXXX	D. Zion

August 2, 1994

Dear XXXXXXXXXX:

Re: Principal Residence

We are writing in response to your letter of April 7, 1994 in which you request confirmation of your opinion that there will be no taxable capital gain upon the sale of your residence. We apologize for the delay in replying.

As we understand the situation, your residence is situated on a parcel of land which is 9.6 acres in size. The property was purchased in 1972 and used exclusively for recreational purposes until 1984. In 1984 the property became your principal residence. You have advised us that at the time of purchase in 1972 the parcel of land was under the Agricultural Land Reserve (ALR) and could not be subdivided. Furthermore, you state that you have never used the property for commercial purposes.

Unfortunately, we have insufficient information regarding your situation to enable us to give you a definitive answer. It is a question of fact as to whether or not a particular property constitutes a principal residence for the relevant years. In addition, it was possible prior to 1982, if certain requirements were met, for a husband and wife to designate different principal residences for those years. We are unable to determine if this would be applicable in your circumstances. Another issue to be addressed would be whether or not the land in excess of 1/2 hectare can be considered part of your principal residence. Where a portion of the land does not qualify for the principal residence exemption, it will be subject to the capital gains provisions effective at the time of disposition.

As all these issues are dependent on the facts particular to your situation, we suggest that you contact

XXXXXXXXXX

Upon a review of all pertinent details and documentation they will be in a position to provide you with a more definite response.

For your information, we have enclosed the 1993 Capital Gains Guide which includes comments concerning a principal residence.

We regret that we could not have been of more assistance.

Yours truly,

P.D. Fuoco
for Director
Business and General Division
Rulings Directorate
Policy and Legislation Branch