After Monsieur acquired a duplex in January 2011, he used the two units for renting to a third party and as his personal residence, respectively. In July 2019 he ceased to rent out the first unit, and appropriated it to his residence.
He disposed of the duplex in December 2022. By making a s. 45(3) election respecting his change of use under s. 45(1)(c) (as permitted by the 2019 Budget changes), he was deemed to have not disposed of the unit that had been used for rental purposes. After noting that it was necessary to report the preconverted living unit and the expanded unit separately in claiming the principal residence exemption, CRA stated:
… [A]n allocation of the adjusted cost base ("ACB") and the proceeds of disposition of a property based on the size of each unit is, in some cases, that of a reasonable allocation. However, the allocation does not need to be based on area. All factors that may affect the value of any unit in the building must also be considered.