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:
principal residence: If taxpayer shares ownership of a parcel of land larger than 1/2 hectare with other joint tenants, can each joint tenant consider his or her ownership to be a proportionate share of the total so that it is no necessary to prove the need for the land in excess of 1/2 hectare in order to fully exempt the property under the p/r rules?
Position:
when each joint tenant is allocate a proportionate share of the land for his or her use, along with a residence, we will consider a joint tenant's ownership of the land to be represented by a proportionate share of the total -thus, in the situation described, the deceased brother would be able to fully shelter any gain on the deemed disposition of the property without being required to prove the need for land in excess of 1/2 hectare, even though the law with respect to joint tenancy or tenancy in common gives him an undivided share in the ownership of the entire parcel of land
Reasons:
previous corresp ec3024, ec3025
A. Humenuk
XXXXXXXXXX 962014
Attention: XXXXXXXXXX
September 24, 1996
Dear Sirs:
Re: Principal Residence Designation - Joint Ownership of Land
We are replying to your letter of May 27, 1996, in which you ask how the principal residence designation applies to property held in joint tenancy as summarized below.
For the purpose of illustrating your question, you asked us to consider the situation when three individuals inherited 1 1/2 hectares of land from their parents. Each individual constructed a personal residence on a separate portion of the land which they own jointly but no application is made to subdivide the land. The land is not farmland. The issue is how the principal residence designation will apply to the individuals when their interest in the property is disposed of.
As set out in paragraph (e) of the definition of principal residence in section 54 of the Income Tax Act (the Act), a principal residence is deemed to include the land subjacent to the house as well as any land immediately contiguous to it, provided that such land contributes to the use and enjoyment of the house as a residence. However, when the total area of land in question exceeds 1/2 hectare, the excess is deemed not to have contributed to the use and enjoyment of the residence unless the taxpayer establishes that the excess is necessary for the use and enjoyment of the housing unit.
While it is a question of fact as to the extent, if any, to which the surrounding land contributes to the use and enjoyment of a particular dwelling, your analysis focuses on the issue of whether each individual may be considered to own 1/3 of the total area of the land without a formal subdivision of the land for the purpose of the principal residence designation. If that were the case, then each individual's respective 1/3 interest in the land would not exceed 1/2 hectare and it would not be necessary to establish that the land was necessary for the use and enjoyment of the housing units.
It is not necessary to have a formal subdivision of the land in order to consider each individual's interest in the land to be included as part of his or her principal residence. It is our opinion that each individual's interest in the property can meet the criteria necessary to be designated as a principal residence as long as the land set aside for each co-owner's use is allocated in proportion to each co-owner's share of the land and the land so allocated does not exceed 1/2 hectare.
You also ask whether our response would be different if the land were the subject of a strata title such that each of the three individuals had sole ownership of his own housing unit and a one third undivided interest in the land. We cannot express an opinion with respect to the tax consequences relating to the creation of a "strata space plan" as that term is used in the Alberta Land Titles Act, without clarification of the details of such a transaction and the nature of your concern.
The comments, as expressed above, are intended as general comments only. If you have a specific transaction, you may wish to submit all the relevant facts and documentation to the appropriate Tax Services Office for their views.
We trust our comments will be of assistance to you.
Yours truly,
John F. Oulton
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1996
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1996
Email this Content