An individual acquires a duplex in 2010 consisting of two identical units. The individual occupies the first unit and rents out the second. At the beginning of 2016, he moves into the second unit, and starts renting out the first. Later in 2016, he incurs significant capital expenditures in renovating the second unit. Does 45(1)(c) apply at the beginning of 2016 or as a result of the renovation? CRA responded:
[A]n immovable is normally considered to be a single and sole property unless it is legally subdivided into two or more separate properties. …
[T]he relation between the use regularly made by the taxpayer of the property for gaining or producing income and the use regularly made of the property for other purposes had not changed at that time [of the move]. Therefore, there was no change in use of the property for the purposes of paragraph 45(1)(c) at the beginning of 2016 by reason of the move of the individual. …
[R]enovations by a taxpayer to only one of the two units in a situation such as that described would not in itself have the effect of changing the relation between the use regularly made by the taxpayer of the property for gaining or producing income and the use regularly made of the property for other purposes. Our comments would be different if the renovation had the effect of changing the relative area of each unit.