7 January 2004 Internal T.I. 2003-0038217 F - gain en capital / résidence principale -- summary under Paragraph 45(1)(c)

A taxpayer constructed a housing unit for his son and son's spouse on the second floor of his personal residence and incurred small losses in renting it out to him. The taxpayer also used part of the basement of his residence for the conduct of a profitable business. The Directorate found that the rental use of the second floor was not relevant to the deemed disposition rule under s. 45(1)(c) as such rental operation had a significant personal element and was not carried on with a reasonable expectation of profit. As for the basement business use, the criteria in IT0120R6, para. 32 (re ancillary use, no structural change and no CCA claims) were satisfied, so that s. 45(1)(c) would not be applied.