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 and capital gains exemptions
Position: must recalculate gain on actual disposition if choose to designate as principal residence for different period than principal residence designation in 1994 capital gains election
Reasons: cannot read in the words "return of income" after the word "or" in 40(2)(b)(D)(i)(b); placement of comma
XXXXXXXXXX 982547
Denise Dalphy
Attention: XXXXXXXXXX January 6, 1999
Dear Sirs:
Re: Principal Residence
This is in reply to your letter dated September 28, 1998 concerning the computation in paragraph 40(2)(b) of the Income Tax Act (the “Act”) of the deemed gain on the disposition of a principal residence.
Our interpretation of paragraph 40(2)(b) of the Act has not changed. As we stated in our earlier correspondence dated March 19 and August 4, 1998, we cannot “read in” the words “return of income” after the word “or” when we interpret the words “unless the property was designated, in a return of income for the taxation year that includes February 22, 1994 or for a preceding taxation year” in clause (i)(B) of “D” in the formula in paragraph 40(2)(b).
The effect of the foregoing is that, on an actual disposition of a property after February 22, 1994, where a taxpayer chooses to designate the property as the principal residence for different years than the property was considered to be the principal residence when the subsection 110.6(19) election was made, the gain must be recalculated pursuant to clause 40(2)(b)D(i)(B). Accordingly, the 1994 capital gains election could not be used for gains from the same period for which the taxpayer uses the principal residence exemption.
The foregoing comments represent our general views with respect to the subject matter. As indicated in paragraph 22 of Information Circular 70-6R3, the above comments do not constitute an income tax ruling and accordingly are not binding on the Department. Our practice is to make this specific disclaimer in all instances in which we provide an opinion.
Yours truly,
for Director
Resources, Partnerships and Trusts Division
Income Tax Rulings and Interpretations Directorate
Policy and Legislation Branch
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