13 February 1997 External T.I. 9639595 - PRINCIPAL RESIDENCE

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:

Whether or not land in excess of 1/2 hectare is part of a principal residence.

Position:

Not able to determine since it is a question of fact.

Reasons:

Previous correspondence and bulletin

				963959
XXXXXXXXXX			Jacques E. Grisé
(613) 957-2059

Attention: XXXXXXXXXX

February 13, 1997

Dear Sirs:

Re: Principal Residence

This is in reply to your letter of November 27, 1996 requesting our technical interpretation on the eligibility to claim the principal residence exemption in respect of a property consisting of a housing unit on a large lot in excess of 1/2 hectare.

A determination of how much land can be considered part of a principal residence in any particular case, based on a review of all the relevant facts and documentation, is normally the responsibility of the Tax Services office serving the area in which the taxpayer resides. We do not propose to discuss the specifics of the particular situation that you have described as this would be a matter for the local Tax Services office. We will, however, comment generally on the Department's interpretation and assessing practices insofar as land in excess of 1/2 hectare is concerned.

In applying paragraph (e) relating to the definition of "principal residence" in section 54 of the Income Tax Act, a taxpayer must first determine what portion of the immediately contiguous land can reasonably be regarded as contributing to the taxpayer's use and enjoyment of the housing unit as a residence. This is a question of fact to be determined on the basis of all relevant information.

If the area of land which contributes to "use and enjoyment" exceeds 1/2 hectare, the Act deems that the excess land does not contribute to the use and enjoyment of the housing unit as a residence. Therefore, the excess land does not form part of the taxpayer's principal residence.

The one exception to the deeming provision is where the taxpayer establishes that the land in excess of 1/2 hectare is necessary to the use and enjoyment of the housing unit as a residence. The Department's view is that the word "necessary" takes its ordinary meaning of "essential" or "needed" particularly as it appears in the context of a contrasting and more restrictive description of the degree to which the land is to relate to the use and enjoyment of the housing unit for purposes of the principal residence definition. Accordingly, land in excess of 1/2 hectare must be essential (demonstrably) to the use and enjoyment of the housing unit as a residence and not merely desirable, helpful or contributory. This is the position which is reflected in the Department's Interpretation Bulletin IT-120R4 and, in particular, in paragraph 21 thereof. Paragraph 22 of the bulletin deals with property affected by a law or regulation requiring a minimum lot size for a residential site which may be another consideration relevant in determining whether land in excess of 1/2 hectare is necessary for the use and enjoyment of the housing unit as a residence.

We hope the foregoing 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