3 January 1995 External T.I. 9431255 - 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:

General - principal residence - land in excess of 1/2 hectare.

Position TAKEN:

Question of fact

Reasons FOR POSITION TAKEN:

IT-120R4 paragraphs 21 and 22, previous correspondence

		943125
XXXXXXXXXX	D. Zion

January 3, 1995

Dear XXXXXXXXXX:

Re: Principal Residence - Capital Gains Tax

We are writing in response to your letter of November 24, 1994 in which you requested our assistance in determining whether the disposition of your family cottage would result in a taxable capital gain.

We do not confirm the tax implications resulting from proposed transactions except by way of an advance income tax ruling as described in the enclosed Information Circular 70-6R2 "Advance Income Tax Rulings" dated September 28, 1990 and Special Release thereto dated September 30, 1992. The following comments are, therefore, of a general nature only, and are not binding on the Department.

It is a question of fact as to whether or not a particular property constitutes a principal residence for the relevant years. It was possible prior to 1982, if certain requirements were met, for a husband and wife to designate different principal residences for those years. There is nothing to preclude the designation of a cottage property as one's principal residence if all the applicable requirements of the Act are met. Another issue which you discuss in your letter and which must be addressed would be whether or not the land in excess of 1/2 hectare can be considered part of your principal residence, assuming the family cottage otherwise meets the requirements of a principal residence. The determination of how much land can be considered part of a principal residence in any particular case involves a finding of fact which can only be determined after a review of all the relevant facts and documentation. Where a portion of the land does not qualify for the principal residence exemption, we confirm that 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 have forwarded your correspondence to Harvey Beaulac, Acting Director at the Ottawa District Taxation Office, 360 Lisgar Street, Ottawa, Ontario, K1A 0L9 for consideration and reply. Mr. Beaulac will arrange for someone to contact you for further information and documentation including a survey of the property in question. Upon a review of all pertinent details and documentation they will be in a position to provide you with a more definite response.

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