3 July 1997 Internal T.I. 9716356 - 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.

		July 3, 1997

Record of Telephone conversation HEADQUARTERS
M. Eisner
(613) 957-8953
971635

Principal Residence Exemption

The following problem on the above noted subject was submitted by the XXXXXXXXXX Tax Services Office in a telephone conversation on June 17, 1997.

Scenario

Mr. A and Mrs. A were married for 20 years. Mrs. A had children from a previous marriage, who were named in her will as the beneficiaries of her estate. Mrs. A died in 1996. At the time of her death, she had owned a home since 1972. Her normal return for the year (1996) in which she died has been filed. A gain on the deemed disposition of her home under subsection 70(5) of the Income Tax Act (the Act) was not reported, as paragraph 13 of Interpretation Bulletin IT-120R4 indicates that it is not necessary to do so (or file Form T2091) unless a taxable capital gain on the disposition of the property remains after using the principal residence exemption.

Mr. A owned a cottage from 1972 until 1996, when he sold the cottage. Mr. A claimed the cottage as his "principal residence" for the years 1972 to 1995 and, in that regard, filed a Form T2091 along with his 1996 income tax return.

Issue

In relation to the above circumstances, the issue is to determine how the principal residence exemption applies to Mr. and Mrs. A, since only one spouse is entitled to the claim. The definition of "principal residence" in section 54 of the Act provides (under paragraph (c)), that if one property qualifies as a taxpayer's principal for a particular year, another property cannot be designated as a principal residence by the taxpayer's spouse for that year. On the basis that Mr. A's cottage and Mrs. A's home otherwise satisfy the necessary requirements of the principal residence definition for the years 1982 to 1995, the sole issue is whether Mr. A or Mrs. A is entitled to designate for the years 1982 to 1995.

Department's Position

Pursuant to paragraph 2301(a) of the Income Tax Regulations, any designation of a property as a principal residence for any taxation year shall be made in the taxpayer's income tax return for the taxation year in which he or she disposed of the property. Consistent with this Regulation and paragraph 13 of IT-120R4, it is the Department's position that whoever of Mr. A or Mrs. A, was the first person to file an income tax return for the 1996 taxation year, will be accepted for the principal residence exemption for the years 1982 to 1995. The last filer will not be able to designate for those years.