6 August 1999 External T.I. 9916045 - PRINCIPAL RESIDENCE - EXCESS LAND

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 fime of issue, may not represent the current posifion 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:

Does 16.8 acres and residence qualifies as a Principal Residence.

Position TAKEN:

Yes

Reasons FOR POSITION TAKEN:

IT-I20R5 (draft) and prior interpretations have confirmed that where zoning restrictions are such that a property cannot be subdivided, generally the whole property would qualify as a principal residence.

XXXXXXXXXX						5-991604
							D Miller

August 9, 1999

Dear Sir:

Re: Principal Residence in Excess of 1/2 Hectare

This is in reply to your letter of April 23, 1999, wherein you requested a ruling, subject to a preliminary estimate of the cost, on the availability of the principal residence exemption in respect of your residence and 16.8 acres of land. Pursuant to a telephone conversation (Wilson/XXXXXXXXXX) you withdrew your ruling request and asked for general comments on the issue.

You presently reside at a property that consists of a housing unit and 16.8 acres of surrounding land and have resided there continuously since August, 1972. At the time of acquisition, the municipality (i.e. the 1971 Preliminary Regional Plan) did require minimum lot sizes for your particular district and did impose, at that time, severance or subdivision restrictions.

Our Comments

Written confirmation of the tax implications inherent in particular transactions are given by this directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R3, dated December 30, 1996. However, as discussed, we are prepared to offer the following general comments.

By virtue of paragraph (e) of section 54 of the Income Tax Act (the "Act"), a taxpayer's principal residence for a taxation year shall be deemed to include the land upon which the housing unit stands and any of the adjoining land that can reasonably be regarded as contributing to the use and enjoyment of the housing unit as a residence.

When the total area of the land exceeds 1/2 hectare, the excess land is deemed not to have contributed to the use and enjoyment of the housing unit as a residence and will not quality as part of a principal residence, except to the extent that the taxpayer establishes that it was necessary for such use and enjoyment.

Some of the factors that have been held to be 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 are minimum lot sizes and severance or subdivision restrictions. To the extent that a taxpayer, in order to acquire a property as a residence, is required by law or regulation to acquire land that exceeds 1/2 hectare, the land that must be so acquired is generally considered to be necessary for the use and enjoyment of the property as a residence throughout the period that the property is continuously owned by the taxpayer after the acquisition date.

We confirm that the comments provided in paragraph 22 of Interpretation Bulletin IT-120R4 still reflect the Department's views on this issue. We also confirm that the comments in paragraph 23 of the bulletin represents the Department's current views where the lot size restrictions are subsequently removed and the taxpayer disposes of a portion of the excess land.

We trust that these comments will be of assistance

Yours truly,

Jim Wilson
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch