Mr. Y and Ms. X , who were the undivided co-owners of a duplex, with each occupying one of the two constituent housing units, disposed of the building and, in the year of disposition, designated their housing unit as their principal residence for the three years they lived there. Could they each use the principal residence exemption to completely shelter their gains under s. 40(2)(b)? In responding affirmatively, CRA stated:
[A] housing unit which has the exclusive use and enjoyment of a taxpayer meets the qualifying criteria for a principal residence. …[C]o-ownership is defined in the C.C.Q. as ownership of the same property, jointly and at the same time, by several persons. The property held in undivided co-ownership may therefore qualify as a principal residence under the terms of the Act. However, according to the findings in Boulet, the co-owner can claim the principal residence exemption only in respect of the housing unit in which he or she lives (or which is inhabited by his or her spouse or common-law partner or former spouse or former spouse or common- law partner or by a child of the undivided co-owner.)
In conclusion, if all the conditions of the definition of principal residence under section 54 are otherwise satisfied, Mr. Y and Ms. X could respectively designate the duplex unit in which they ordinarily reside as their principal residence.