Principal Issues: [TaxInterpretations translation] Can a unit in a triplex be designated as a principal residence for the purposes of the definition of principal residence in section 54?
Position: Generally, yes.
Reasons: Where the units in a triplex are separate units, each of the units may be considered to be a unit that may be designated as a principal residence as defined in section 54, provided that all the conditions of the definition of principal residence in section 54 are otherwise satisfied.
XXXXXXXXXX
2010-037550
I. Landry, M. Fisc.September 28, 2010
Dear Madam,
Subject: Triplex held in co-ownership – principal residence
This is in response to your letter of July 14, 2010, asking whether a unit in a triplex qualifies as a principal residence for the purposes of the definition of principal residence in section 54.
Unless otherwise indicated, all legislative references herein are to the provisions of the Income Tax Act (the "Act").
Our Comments
As stated in paragraph 22 of Information Circular 70-6R5, Advance Income Tax Rulings, it is the practice of the Canada Revenue Agency not to issue a written opinion regarding proposed transactions otherwise than by way of advance rulings. Furthermore, when it comes to determining whether a completed transaction has received appropriate tax treatment, that determination is made first by our Tax Services Offices as a result of their review of all facts and documents, which is usually performed as part of an audit engagement. However, we can offer the following general comments that we hope may be helpful to you.
Where the units in a triplex are separate units, it is generally our view that each of the units is an independent housing unit for purposes of the definition of principal residence in section 54.
A taxpayer who is an undivided co-owner of a triplex could therefore designate the unit in the triplex that was ordinarily inhabited by the taxpayer as the taxpayer’s principal residence if all the conditions of the definition of principal residence in section 54 were otherwise satisfied. If this is the case, the taxpayer could therefore claim the principal residence exemption in paragraph 40(2)(b) on the disposition of the taxpayer’s share of the triplex to reduce or eliminate the capital gain in respect of that unit.
We hope that our comments will be of assistance.
Best regards,
Randy Hewlett
Manager
for the Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch.