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 designated their housing unit as their principal residence for the three years they lived there. Before finding that each use could use the principal residence exemption to completely shelter their respective gains under s. 40(2)(b), CRA commented on the nature of their co-ownership interest:
Article 1016, para. 1 C.C.Q. provides that "[e]ach undivided co-owner may make use of the undivided property provided he does not affect its destination or the rights of the other co-owners.” Also, agreements relating to the use and exclusive enjoyment of an undivided property may concern all or part of it and may equally or unequally benefit all or only certain of the co-owners. A building owned in undivided co-ownership by two individuals in a proportion of 50% each, is owned for each of its parts by each of the individuals in a proportion of 50%, even if each one of them has the exclusive use and enjoyment of the part of the property reserved for him or her. …
In the case where each of the co-owners has the exclusive right to live in his or her own unit, the value of their undivided share must take into account at the same time the exercise by each of them of the exclusive use and enjoyment of their unit, which necessarily includes the right to the use of the common parts of the building, and the prohibition on the use of the unit occupied by the other co-owner. Consequently, even if a person legally is selling his or her undivided interest in an immovable, the value of that share is attributable to the unit he or she lives in and is disposing of for the purposes of the Act.