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.
Principal Issues: 1. Can a corporation claim the principal residence exemption?
Position: 1. No.
Reasons: 1. The principal residence exemption is available only to individuals.
XXXXXXXXXX 2011-041469
Robert Dubis
November 22, 2011
Dear XXXXXXXXXX :
We are replying to your letter of April 28, 2011 regarding the availability of the principal residence exemption to a corporation.
You state that you intend to purchase a home in Canada which would be your principal residence. For legal reasons, you would like to know if you can register ownership of the home in the name of a corporation and claim the principal residence exemption upon the sale of the home by the corporation.
If a property qualifies as a principal residence, an exemption can be claimed under paragraph 40(2)(b) of the Income Tax Act ("Act") to reduce or eliminate any capital gain otherwise occurring on the disposition of the property. The paragraph 40(2)(b) exemption is only available to individuals. An individual is defined in subsection 248(1) of the Act to mean a person other than a corporation. Consequently, where a principal residence is held in a corporation, the corporation would not be entitled to claim the principal residence exemption on the disposition of the residence.
We trust that the information provided is helpful.
Yours truly,
Sharmini Ratnasingham
Assistant Director
for Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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