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 section 54.1 applies to extend principal residence exemption beyond 4 year election period if taxpayer does not move back into the housing unit but instead buys new housing unit in same area; whether moving back into housing unit for a few days would satisfy the requirement.
Position:
No.
Reasons:
Must resume ordinary habitation in the housing unit and moving in for a few days unlikely to satisfy this requirement.
XXXXXXXXXX 971587
September 17, 1997
Dear XXXXXXXXXX:
Re: Exception to Principal Residence Rules
This is in reply to your letter of April 13, 1997, to the Edmonton Tax Services Office. You ask whether your house in Coquitlam can qualify as your principal residence beyond the four-year limit for an election made in accordance with subsection 45(2) of the Income Tax Act (the "Act"). You refer to the requirement, set out in paragraph 54.1(1)(a) of the Act, that you must return to the original home while you are employed with the same employer and ask whether instead you might move to a new house in the Greater Vancouver area while employed with the same employer.
Your question relates to the application of the Income Tax Act to a proposed transaction and we are unable to provide a binding interpretation except in the context of an advance income tax ruling. We can provide the following general comments, however.
The rules are explained in Interpretation Bulletin IT-120R4, "Principal Residence", a copy of which is enclosed for your information. In particular, please refer to paragraph 33. As you will note, section 54.1 of the Act requires that you resume, while employed with the employer, ordinary habitation of the housing unit to which the principal residence exemption has been applied by virtue of the election under subsection 45(2) of the Act. Whether you "ordinarily inhabit" the housing unit on your return is a question of fact. Note the comments in paragraph 12 of the enclosed Interpretation Bulletin concerning the meaning of "ordinarily inhabited".
Therefore, it is our view that section 54.1 of the Act will not apply should a person move into a new housing unit on return to the particular area. It is also our view that should a person move into the original house for a few days before moving to a new house, he or she would probably not be considered to have resumed "ordinary habitation" in the original home.
Although the foregoing comments are not binding on the Department with respect to your particular situation, we trust they satisfactorily explain the law as it applies in general.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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