Principal Residence


Stuart (Estate) v. Canada, 2004 DTC 6173, 2004 FCA 80

Counsel for the taxpayer unsuccessfully argued that the personal circumstances of the deceased taxpayer represented a personal barrier to subdivision, namely, that she lacked sufficient funds to effect a subdivision of the property. Malone J.A. stated (at p. 6176):

The evidence that is relevant to the question of how much land in excess of 1/2 hectare is necessary to the use and enjoyment of a housing unit as a residence is mainly objective, and must be linked to the legal and physical characteristics of the property. Without intending to be exhaustive, the relevant factors would typically include zoning restrictions affecting the use or sale of the property, access to roads and necessary utilities, and geographical or topographical barriers to subdivision.

Carlile v. The Queen, 95 DTC 5483 (FCA)

The taxpayer owned a property of approximately 33 acres of which three acres around her house were for personal use and 25 acres of the remaining acreage were rented to a farmer. The relevant by-law prescribed a minimum lot area of 25 acres for farming use and, for residential use, required a minimum lot area of 20,000 square feet. Desjardins J.A. found that the taxpayer had satisfied the requirements of the "objective test" given that residential use could only be obtained through consent under the provisions of the Planning Act, and given evidence that there was no assurance that such consent could have been obtained. Accordingly, the principal residence exemption was available on a sale of the whole property.

Augart v. The Queen, 93 DTC 5205 (FCA)

The taxpayer was entitled to the principal residence exemption on the capital gain arising on the sale, under threat of expropriation, to the local municipality of the full 9 acres on which his rural home was situate because subdivision controls would have precluded him from selling to a normal purchaser any portion of the parcel. It was essentially irrelevant that the minimum lot size under the prevailing by-laws at the time of purchase was 3 acres, given that the subdivision controls would have precluded the taxpayer from selling off the excess 6 acres. Robertson J.A. noted (p. 5209) that the term "enjoyment" included not only the exercise of the right of possession, but also included the right of alienation, and that a disposition of the 9 acres was necessary in order for the taxpayer "to exercise his right of alienation or, to trace the language of the Act, to the 'enjoyment' of his residence".

Words and Phrases

Fourt v. The Queen, 91 DTC 5631 (FCTD)

Lot 77 adjoined the lot (Lot 76) on which the taxpayer had her house and was used as base for a storage shed, an outhouse, an incinerator, some lawn and parking. The combined area of the two lots was less than 1/2 hectare. Lot 77 was found to contribute to the use and enjoyment of Lot 76, notwithstanding that it was not necessary to such use and enjoyment. Strayer J. stated (p. 5634)):

... Where there is credible evidence, as there is here, of actual use and enjoyment by the taxpayer of the contiguous land in connection with her house, and such use and enjoyment is not of an exaggerated or a natural sort, a great deal of weight must be attached to it in assessing whether such use can be reasonably regarded as contributing to the taxpayer's use and enjoyment of his residence.

Windrim v. The Queen, 91 DTC 5221 (FCTD)

The taxpayer, who purchased 17.6 acres of land knowing that it could not be subdivided, and who lived on the land for several years in a mobile home, was not entitled to claim the principal residence exemption with respect to more than the two hectares allowed by the Minister, because the mobile home as a supposed "housing unit" "simply had no identifiable subjacent or contiguous land" (p. 5227) given that the mobile home was not required to be affixed to any given portion of the land, and because, unlike the Yates case, when the taxpayer bought the lot he did not wish it to be subdividable, but instead "knowingly and quite intentionally bought a grandiose lot with its little trout-stocked lake, its ridge with a view of the sea, its forest and its forest trails" (p. 5227).

Muldoon J. also noted that "the meaning of 'enjoyment/jouissance' eschews all connotation of 'hedonism or volupté'" (p. 5226).

Words and Phrases
Locations of other summaries Wordcount
Tax Topics - Statutory Interpretation - Similar Statutes expropriation and tax legislation not in pari materia 30

Mintenko v. The Queen, 88 DTC 6537, [1989] 1 CTC 40 (FCTD)

A farm house which the taxpayer lived in from April to October of 1976 before being told by his bride-to-be that she refused to live there, was "ordinarily inhabited" by him in the year. The taxpayer also was able to establish that an area of uncultivable land containing about three acres immediately surrounding the house on which was located the well, some outbuildings, shade trees and a little grass was essential to the enjoyment of the residence, bearing in mind that there were no municipal water and services.

The Queen v. Yates, 83 DTC 5158, [1983] CTC 105 (FCTD), aff'd 86 DTC 6296 [1986] 2 CTC 46 (FCA)

The taxpayer met the onus of showing that all of a 10 acre lot contributed to his enjoyment of his house where it was shown that 10 acres was the minimum residential parcel permitted by a zoning by-law, notwithstanding that 9 acres were not used for residential purposes but were instead rented to a neighbouring farmer who grew crops on them.

The Queen v. Mitosinka, 78 DTC 6432, [1978] CTC 664 (FCTD)

The taxpayer rented out 1/2 of an unusual structure which was analogous to a duplex but which had a common basement and a window connecting the adjoining kitchens. In light of the facts that the building "could, and did, house separate families, who had separate facilities, and paid for separate services," only 1/2 of the building was held to be the "housing unit" of the taxpayer. The Minister's allocation of 1/2 of the underlying land to the taxpayer's principal residence was not shown to be unreasonable.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Fair Market Value - Land 91

See Also

Palardy v. The Queen, 2011 DTC 1188 [at 1050], 2011 TCC 108

The taxpayer sold a residence eight months after the point at which she had completed its construction and moved in. The Minister characterized the sale as a commercial transaction, and reassessed the taxpayer beyond the normal reassessment period on the basis that the proceeds were income from business. In so doing, the Minister had relied in part on the taxpayer's experience as a real estate agent, but in fact the taxpayer had left the real estate business more than 25 years before the sale in issue.

In concluding that the reassessment was not statute-barred, Hogan J. found that the taxpayer's position (that she had realized a capital gain that was eligible for the principal residence exemption) was not unreasonable, and stated (at para. 28):

[E]ven if a person occupies a building for a short time, it can be considered his or her principal residence.

Boulet v. The Queen, 2010 DTC 1015 [at 2602], 2009 TCC 261

A basement apartment in the house inhabited by the taxpayer, which had a kitchenette, bedroom and bathroom, was accessible only through an exterior door and had its own municipal address, was not part of the taxpayer's principal residence since the evidence produced showed that the taxpayer did not ordinarily inhabit the basement during the year in which the house was sold.

Words and Phrases
housing unit
Locations of other summaries Wordcount
Tax Topics - General Concepts - Fair Market Value - Land 201
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) exercise of legal entitlement not a benefit 254

Sidhu v. The Queen, 2004 DTC 2540, 2004 TCC 174

In finding that a property that the taxpayer had used as a rental property for approximately nine years but which allegedly was used for a short period of time as a personal residence before its sale did not qualify as the taxpayer's principal residence", Hershfield J. stated (at p. 2546) that a line of cases had found "that a casual residence, which is a residence occupied by a person but which is not reflective of where that person lives in the course of his/her customary mode of life, is not a residence at which that person 'ordinarily' resides".

Estate of Myrth May Stuart v. The Queen, 2003 DTC 329, 2003 TCC 171, aff'd supra.

The estate of the deceased taxpayer was unable to establish that more than one-half hectare of a 1.4 hectare property was necessary for the use of the property as a principal resident notwithstanding evidence that the deceased taxpayer ate daily from fruits and vegetables harvested from the property. Ripp T.C.J. stated (at p. 336) that:

"The word 'necessary' in the section 54 definition of 'principal residence' connotes a term that is indispensable, not one that is convenient, useful or suitable."

Words and Phrases

Low v. The Queen, 93 DTC 927 (TCC)

The taxpayer failed to establish that the ownership of a Florida condominium was held by a Liechtenstein "establishment" as bare trustee for the taxpayer. Accordingly, the taxpayer was unable to claim the principal residence exemption.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Ownership 55

Lewis v. Lady Rook, [1990] BTC 9 (Ch. D.)

The Court upheld the commissioners' finding that a gain on the disposal of a gardener's cottage 175 metres from the main house on a 10.5 acre estate constituted a part disposal of the taxpayer's main residence for purposes of s. 101(1) of the Capital Gains Tax Act, 1979.

Flanagan v. MNR, 89 DTC 615 (TCC)

A lake front lot to which the taxpayer drove his mobile vans from his Vancouver residence for weekends and vacations qualified as his principal residence on the basis that it was subjacent or contiguous land which contributed to his enjoyment of his vans, and on the basis that "a person may ordinarily inhabit more than one housing unit in a year if he does so in the course of the customary mode of his life." However, a second lot to which the septic system of the first was connected, did not qualify.

Williams v. Merrylees, [1987] BTC 393 (HCJ.)

A lodge on a four acre estate that was located about 200 metres from the main house and was occupied by a gardener employed by the taxpayer was held to be part of his residence.

Markey v. Sanders, [1987] BTC 176 (HCJ.)

In order for two buildings to be regarded as one residence, the occupation of the second building must increase the taxpayer's enjoyment of the main building, and the second building must be regarded as being very closely adjacent to the main building. The second test was not satisfied with respect to a three-bedroom servant's house which was "sited well over an acre's worth of land away from the main residence and separated from it by a paddock".

Batey v. Wakefield, [1981] T.R. 251, [1982] 1 All E.R. 61 (C.A.)

S.29(1) of the Finance Act 1965 exempted an individual from capital gains tax on the disposition of "a dwelling house which is ... his own or main residence". A family occupied an 8-room house in the country on the weekends, and a caretaker-gardener, who lived with his family in a chalet-bungalow on the grounds that was separated from the main house "by about the width of a tennis court and a yew hedge", took care of the premises during the week.

It was held that the exemption was available. "[I]n the ordinary use of English, a dwelling house, or a residence, can comprise several dwellings which are not physically joined at all. For example, one would normally regard a dwelling-house as including a separate garage." Although the bungalow provided separate accommodation to the caretaker's family, its purpose was to assist in servicing the main building.

R. v. Gerencer (1979), 105 DLR (3d) 284, [1980] 1 S.C.R. 403

The whole of a small farm, the produce from which was used by the owner for home use and animal fodder, was held to be "used by the owner thereof for the purposes of his residence" within the meaning of s. 24 of the Expropriation Act (Canada).

Administrative Policy

21 June 2017 External T.I. 2017-0687961E5 - Principal residence exemption and farm property

a non-severable parcel of farming land could not have two beneficial owners of the principal residence and farming portions thereof

Although a farmhouse cannot legally be legally severed from the rest of the (farming) parcel of land on which it is situated,the individual owner would like to transfer the farm to a wholly-owned corporation while retaining beneficial ownership of the farmhouse. Could the principal residence exemption be claimed when the parcel is ultimately sold by the corporation? CRA responded:

[T]he essential rights of ownership of a property used as an individual’s principal residence cannot be transferred or retained separate from the ownership of the rest of the property because the individual does not retain the right of alienation (that is, the ability to transfer the property). The right of alienation together with the right of possession, are the two essential elements of ownership in the context of a principal residence.

Therefore…the individual would not be able to claim the principal residence exemption on a subsequent disposition of the property by the corporation.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Ownership purported retention of beneficial ownership of portion of non-severable parcel of land was ineffective 110

S1-F3-C2 - Principal Residence

Meaning of housing unit

2.7 ...

  • a housing unit... could include:
    • a house;
    • an apartment or unit in a duplex, apartment building or condominium;
    • a cottage;
    • a mobile home;
    • a trailer; or
    • a houseboat.

Meaning of ordinarily inhabited/Rental to child

2.11 ... Even if a person inhabits a housing unit only for a short period of time in the year, this is sufficient for the housing unit to be considered ordinarily inhabited in the year by that person. ...[I]f the main reason for owning a housing unit is to earn income but the housing unit is rented to the taxpayer’s child who also ordinarily inhabits the housing unit in that year, the taxpayer could still designate that housing unit as the taxpayer’s principal residence provided the other conditions are met.

Land exceeding 1/2 hectare

2.34 Land in excess of one-half hectare may be considered necessary where the size or character of a housing unit together with its location on the lot make such excess land essential to its use and enjoyment as a residence, or where the location of a housing unit requires such excess land in order to provide its occupants with access to and from public roads. Other factors may be relevant in determining whether land in excess of one-half hectare is necessary for the use and enjoyment of the housing unit as a residence, such as, for example, a minimum lot size or a severance or subdivision restriction... .

2.35 A municipal or provincial law or regulation may require, for example, a minimum lot size for a residential lot in a particular area that would be in excess of one-half hectare, or impose a severance or subdivision restriction with respect to a residential lot in a particular area restricting the lot from being one-half hectare or below. If such a law or regulation existed in any given year during which the taxpayer owned the property, the area that is in excess of one-half hectare would normally be part of the principal residence for that particular year.

7 October 2016 APFF Roundtable Q. 2, 2016-0652841C6 F - Changement partiel d’usage - immeuble locatif et résidentiel

triplex contained separate housing units

An individual owner of the whole triplex used Unit 1 (representing 50% of the area) for direct personal use and rented out the other two units – then some years later (at the beginning of “Year 11”), started renting out Unit 1, moved into Unit 2 for direct personal use and provided Unit 3 to family members at a low rent.

CRA considered that because, after this change, the use of the single property (the triplex) was still 50% personal and 50% 3rd-party rental, the change of use rules in s. 45 did not apply. However, on a subsequent sale of the triplex, the individual would be required to make separate designations for each unit for which he was claiming the principal residence exemption. For example, in the case of Unit 1, a portion of the gain (calculated using appropriate allocations based on relative values) "could be designated for purposes of the principal residence exemption."

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 45 - Subsection 45(1) - Paragraph 45(1)(c) switch between which triplex units used for personal/family rental or 3rd-party rental did not trigger change of use 237
Tax Topics - Income Tax Act - Section 40 - Subsection 40(2) - Paragraph 40(2)(b) on sale of triplex, individual can claim exemption only for years in which particular units were used personally or by children 387

21 January 2016 Ordre des CPA du Québec Personal Taxation Roundtable Q. 9, 2016-0625141C6 F - Principal residence - duplex

interior access door to other unit in duplex occupied by elderly parent, and meal sharing, not sufficient to render as one housing unit

An individual purchases a duplex to support and provide care to an elderly parent, and renovates it so a door now provides interior access between the two units. Meals are mostly are prepared and taken (with the parent) in the living space of the owner and the owner’s family. On resale of the property, would there be a disposition of one or two housing units? What if the duplex belonged to the parent? CRA responded (TI translation):

[T]wo units of a duplex will be considered as together constituting a single housing unit to the extent that they are sufficiently integrated so that it is not possible to live normally in the living areas of one of the units without also having access to the other unit in order to use its facilities. This will be the case, for example, if one of the units contains all the bedrooms while the other unit contains the kitchen and the bathroom, and the two units are jointly used for residential purposes as a single unit. …

[T]he fact that inner door access is installed between the two units or that meals are prepared and taken the vast majority of the time in one of the two units does not appear to be sufficient for the two units to be considered as a single housing unit for the purposes of the I.T.A. The fact that the two units each have a bedroom, a kitchen and a bathroom and separate street addresses and their own electric meter are elements that tend to indicate that they instead are two separate housing units. On this basis, only the housing unit ordinarily inhabited by the individual qualifies as a principal residence. …

Our comments would be the same if the property belonged to the parent, except that in this case, one or other of the housing units could qualify as the principal residence of the parent.

Words and Phrases
housing unit

4 March 2015 Internal T.I. 2015-0567791I7 F - Exemption résidence principale louée à un enfant

house leased to son with CCA claimed can be designated as principal residence

A taxpayer claims capital cost allowance ("CCA") as a deduction from his rental income for the period when his housing unit is leased to his son. Can this taxpayer to designate this dwelling as his principal residence? After noting that para. (a) of the principal residence definition references ordinary habitation by the taxpayer’s child, CRA stated:

[T]he fact that a taxpayer claims CCA for a dwelling that is leased to his or her child will not prevent the taxpayer from designating the dwelling as his or her principal residence insofar as the housing unit was normally inhabited by the taxpayer's child…. However, when disposing of the property, any recapture of depreciation must be included in computing the taxpayer's income.

23 June 2014 External T.I. 2014-0528271E5 F - Terrain « adjacent » à la résidence principale

meaning of immediately contiguous lands

The taxpayers, whose "Lot 1" included a floodplain, were legally precluded from expanding their residence until they purchased the nearby "Lot 2." Is Lot 2 part of their principal residence? CRA stated (TaxInterpretations translation):

The English version of the Act translates the expression "terrain adjacent" by "immediately contiguous land." This text…clearly requires a physical contact between the lots. Consequently…Lot 2 is not "adjacent" to Lot 1…[and] Lot 2 therefore is not eligible for the capital gains exemption for a principal residence.

28 August 2013 External T.I. 2013-0498701E5 - Principal Residence Exemption - Excess Land

After noting that a minimum lot size or severance restriction would generally support a taxpayer's claim that land more than a half-hectare is necessary to the use and enjoyment of a principal residence, CRA stated:

[I]n circumstances where subsequent to a taxpayer's acquisition of a particular property there has been a relaxation of a previously existing minimum lot size or severance restriction, the taxpayer would need to clearly demonstrate that any excess land continued to be necessary for the use and enjoyment of the housing unit as a residence for each of those years even if the taxpayer did not take any steps to actually sever the excess land.

18 June 2013 External T.I. 2013-080951E5 -

Ontario's MicroFIT program provides a mechanism for individuals to sell electricity to the Ontario Power Authority that is generated from, e.g., photovoltaic solar panels. CRA maintains FAQs on the MicroFIT program at

As per Question 7 of the FAQs, Reg. 1100(24) limits the CCA on solar equipment to the income from selling the electricity generated therefrom.

Where a principal residence is sold that has solar cells, CRA stated:

[W]hen you sell your residential home, a reasonable portion of the sale price must be allocated as proceeds of disposition of the Solar Equipment. The proceeds of disposition should be reported in Area A on page 4 of your T2125 Statement of Business or Professional Activities. The balance of the sale price is generally allocated to the residential home. If the residential home was designated as a principal residence for every year that it was owned, there will be no income tax consequences on the disposition. You should also note that the disposition of the Solar Equipment may result in a recapture into income of any CCA claimed on the equipment and such recaptured income must be reported for income tax purposes.

13 February 2013 Internal T.I. 2012-0448391I7 - Validity of late-filed election and designation

The taxpayer, who sold a duplex to a non-arm's length person, filed his tax return on time without disclosing the disposition, then approximately two years later designated half of the duplex as a principal residence for various taxation years. CRA stated:

[T]here is no legislative authority to accept a late-filed principal residence designation.

6 February 1996 T.I. 952945 (C.T.O. "Life Leases")

Where an exchange for a lump sum prepayment and monthly fees, an individual is given a lease to occupy a specific housing unit in a building owned by a non-profit organization for life, the life lease should qualify for the principal residence exemption provided that it is "a bona fide contract of lease creating a leasehold interest".

6 February 1996 T.I. 952944 (C.T.O. "Proprietary Leases")

Where an individual owns shares of a non-profit organization owning a building in which a number of housing units will be created, share conditions containing a right and obligation of the shareholder to enter into proprietary lease with the organization for a specified period of time for a particular housing unit apportioned to the shares would not qualify as a leasehold interest for purposes of the principal residence definition.

Income Tax Technical News, No. 7, 21 February 1996

The filing of a protective capital gains election under s. 110.6(19) in respect of a property will not by itself prejudice a claim that the entire property qualifies as a principal residence.

4 May 1995 Memorandum 950960 (C.T.O. "Principal Residence Exemption and Capital Gains")

Detailed discussion of whether the principal residence exemption is available where a client purchases a house located on a lot under ½ hectare in size and later, after obtaining approval for a subdivision, either sells the additional lot, or builds a house on the additional lot and sells it; and in a situation where the client buys a house located on a ¼ acre and also buys the adjacent ¼ acre lot, either at the same or at a subsequent time.

7 March 1995 T.I. 950030 (C.T.O. "Principal Residence and Capital Gains")

Where the father owned and lived in a residence with his adult son and, after his remarriage, moved in with his new spouse while his son continued to live rent-free in the residence, the property continues to qualify as the father's principal residence, with the result that a deemed gain arising on a subsequent transfer of the residence to his son is exempt.

23 February 1995 943149 (C.T.O. "Principal Residence Exemption & Capital Gains Election")

A taxpayer and his wife who in 1981 subdivided their principal residence property (which was under 1/2 hectare in area) and recently constructed a new residence on one of the lots, would be entitled to the principal residence exemption on the disposition of the second lot, given the position in IT-120R4, paragraph 20, that no proof normally is required with respect to the "use and enjoyment" requirement where the land does not exceed 1/2 hectare.

9 February 1995 Memorandum 950255 (C.T.O. "Principal Residence Exemption")

Where both the cottage and the house were registered in the husband's name from 1972 until the recent transfer of the cottage into the wife's name, the wife will be able to designate the cottage as her principal residence for the years 1972 to 1981 provided that she meets the "inhabited" criteria in the principal residence exemption, given that under s. 40(4)(a) she will be deemed to have owned the cottage for the length of time that her husband owned the cottage.

16 August 1994 T.I. 940581 (C.T.O. "Principal Residence")

The principal residence exemption is available in respect of a house owned by a married couple that is occupied by and rented to their adult child even if they have claimed capital cost allowance on the house.

2 June 1994 T.I. 933453 (C.T.O. "Principal Residence for Personal Trust and Beneficiaries")

A discretionary beneficiary of a personal trust cannot claim a separate principal residence from the personal trust if the home belonging to the personal trust is occupied by an adult child.

21 January 1994 T.I. 932197 (C.T.O. "Personal Residence")

Shares in a co-operative that constructs a building of which 15% of the square footage is to be leased commercially will not qualify as having been acquired for the sole purpose of acquiring a housing unit.

18 September 1992 T.I. (Tax Window, No. 23, p. 3, ¶2177)

RC has no administrative practice to depart from the requirement in s. 54(g)(iii) that the separation be under a judicial separation or pursuant to a written separation agreement.

14 March 1990 T.I. (August 1990 Access Letter, ¶1370)

Although a priori a building held by a superficiaire will be eligible for the principal residence exemption, the right held by the superficiairee should encompass some or at least many of the attributes of ownership, such as the ability to dispose of the building or mortgage it.

23 February 1990 T.I. (July 1990 Access Letter, ¶1347)

In a situation where a building was held in joint tenancy by an individual and a corporation which he owned, the entire portion occupied and used by the individual could qualify as his principal residence. The proceeds of disposition of the principal residence portion of the property would be the same proportion of the entire proceeds that the fair market value of the principal residence portion would be of the fair market value of the entire property at the time of disposition.


Marjorie Bergeron, "Principal Residence: When Civil Law Muddles Tax Law", Canadian Tax Focus, Vol. 3, No. 2, May 2013, p. 8.

…the right of ownership may be dismembered into usufruct, use, servitude, and emphyteusis under articles 1119 et seq. of the Civil Code of Québec (CCQ). Let us assume that one of these dismemberments applies to a property "ordinarily inhabited" within the meaning of "principal residence" in section 54. Suppose that a widow with a usufruct lives in the principal residence, but the bare (or legal) ownership belongs to the children…. Can each of the two parties claim an exemption for capital gain?

For federal income tax purposes, the answer is normally yes. this conclusion is based on a reading of clause 248(3)(a)(i)(A) of the Act, which stipulates that "the usufruct, right of use or habitation, or substitution, as the case may be, is deemed to b4e at that time a trust," and of paragraph (c.1) of the definition of "principal residence" in subsection 54, which states that a trust may designate a property as its principal residence.

Gene Katz, "The Principal Residence Exemption", Personal Tax Planning, 2001 Canadian Tax Journal, Vol. 49, No. 4, p. 990

Paragraph (a)

Administrative Policy

21 January 2016 Roundtable, 2016-0625161C6 F - Résidence principale habitée par un enfant

related occupant of a principal residence can be charged FMV rent

Could a housing unit qualify as a principal residence of a taxpayer if the taxpayer rented the property to a child for a fair market value (or less than fair market value) rent? CRA responded (TI translation):

The definition of principal residence does not provide that a housing unit which is rented cannot be a principal residence when the tenant who lives in the unit is one of the persons listed in paragraph (a) of this definition. Consequently, we are of the view that the mere fact that a taxpayer rents a housing unit to a child for a rent corresponding to its fair market value or some other value, will not prevent the taxpayer from designating this unit as his principal residence provided that all the conditions provided in the definition of "principal residence" are satisfied.

29 August 2014 External T.I. 2014-0541901E5 - Meaning of "child" in "principal residence"

occupation by adult child

A housing unit owned by a particular individual could still qualify for the principal residence exemption where it was ordinarily inhabited by the individual's adult child and not the particular individual.

9 July 2014 External T.I. 2014-0527591E5 F - Résidence principale

housing unit rented to son and unrelated roommate potentially could qualify as principal residence

An individual owns a housing unit that he leases to his adult son and to unrelated individuals who are the son’s roommates, all of whom ordinarily inhabit the unit. Is the exemption available? CRA responded:

[A]t least part of the housing unit is "ordinarily inhabited" by the son. If this is the main use of the housing unit and if the … three criteria [in S1-F3-C2] are met, the housing unit could qualify in its entirety as a principal residence… .

….On the other hand, if the income producing activity is significant, structural changes have been made or CCA has been claimed for the property, only the part of the housing unit used for personal purposes by the son will qualify as a principal residence.

…[T]he designation of the rental property leased to the son as a principal residence, in whole or in part, … will affect the calculation of such exemption upon the individual's disposition of his own principal residence.

Paragraph (c.1)

Administrative Policy

9 September 2013 External T.I. 2012-0464321E5 - Application of subsections 107(2) and 107(2.01)

specified and non-specified beneficiaries

A personal trust holds a principal residence of a specified beneficiary (as defined in subpara. (c.1)(ii) of the "principal residence" definition in s. 54), and has several other beneficiaries who are not specified beneficiaries.

If the trust distributes the principal residence to all the beneficiaries equally and makes a s. 107(2.01) designation, the designation will not be invalidated because the other beneficiaries are not specified beneficiaries (as only one such beneficiary is required). Respecting the reference in s. 107(2.01) to a distribution "by the trust to the taxpayer," the singular includes the plural.

If no election is made, then each beneficiary claiming the principal residence exemption must, in his or her own right, satisfy the requirements of ss. 40(2)(b) and (c), although s. 40(7) will deem a residence acquired by a beneficiary in satisfaction of a part of a capital interest in the trust to have been owned continuously since the trust last acquired it.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - 101-110 - Section 107 - Subsection 107(2.01) specified and non-specified beneficiaries 152

Paragraph (d)


Haber v. The Queen, 83 DTC 5004, [1982] CTC 405 (FCTD)

The statutory language does not permit an individual to designate 2 housing units as principal residences of the individual for the year.

Paragraph (e)


Cassidy v. Canada, 2011 FCA 271

The taxpayer sold his six-acre rural property after it was rezoned for residential use as a result of an application made on behalf of owners of adjacent properties. He claimed a principal residence exemption on the entire gain. The Tax Court restricted the exemption to a half-hectare of the property contiguous with the house on the basis that the determination under paragraph (e) of the definition of "principal residence" is to be made at the time the property is sold, and at that time the property had been rezoned and could be subdivided. Therefore, the entire six acres were no longer necessary to the use and enjoyment of the residence.

The Court of Appeal granted the taxpayer's appeal. Sharlow J.A. stated (at para. 35):

The error in the interpretation of paragraph 40(2)(b) proposed by the Crown, and perhaps implicit in Joyner, is that it fails to give effect to the language of paragraph 40(2)(b) that defines variable B. As mentioned above, the determination of variable B requires a determination, for each taxation year in which the taxpayer owned the property in issue, as to whether the property met the definition of "principal residence" of the taxpayer for that taxation year.

Given that the rezoning and the sale both occurred in 2003, and in light of the "plus one" component of B, the taxpayer was entitled to the principal residence exemption on the entire gain.

Administrative Policy

10 June 2016 External T.I. 2015-0590371E5 F - Résidence principale - stationnement

a parking space can form part of a condo housing unit

An individual (the "Condo Owner") acquired one or more parking spaces as part of the acquisition of a condo unit (the “Unit,”), which is used as a personal residence. Would the principal residence exemption be available on the sale of such a “Parking Space,” for example, on a sale of the Parking Space, but not the Unit, to another condo owner? After noting that the Parking Space by itself did not qualify as a principal residence, CRA stated (TaxInterpretations translation):

[A] Parking Space that facilitates the use of the housing unit is part of the housing unit for the purposes of the definition of "principal residence"… .

[W]e [also] would require that the Parking Space be part of the private area or common area of the building that includes the Unit, all in accordance with the Declaration of Condo Ownership for the building. The Unit and the Parking space must be owned by the same person. …

[T]he mere fact that a Condo Owner sells only a Parking Space to another condo owner does not automatically preclude the Parking Space, which is a component of the housing unit, from qualifying. …

[T]he "principal residence" designation relates to the Unit. Consequently, when a condo owner eventually disposes of the Unit, it would also be recognized as a the "principal residence" for the taxation years for which the designation…was made.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 40 - Subsection 40(2) - Paragraph 40(2)(b) designating condo parking space for a year does not exhaust exemption for the condo unit 158

8 December 2011 External T.I. 2011-0421051E5 - Principal residence - Bed and Breakfast

In providing a brief review on whether operating a bed & breakfast (B&B) on a property would make the principal residence exemption unavailable on that property, CRA indicated (referring to para. 32 of IT-120R6) that "whether use of a portion of the property as a B&B operation is ancillary to the main use of the property as the taxpayer's principal residence are ultimately questions of fact."

30 September 2011 Internal T.I. 2011-038789 -

CRA reviewed the state of jurisprudence on paragraph (e) of the principal residence definition, and indicated that a piece of land larger than a half-hectare will generally not be necessary for the use and enjoyment of a housing unit as a residence if the land can be subdivided in a manner that moves towards the "highest and best use" of the land, as defined in The Canadian Uniform Standards of Professional Appraisal Practice. CRA stated: "an appropriate test is a probability of subdivision which is greater than 50% after considering the interaction of four criteria: legal permissibility [e.g. zoning bylaws], physical possibility, financial feasibility, and maximum profitability."