| 19(1) | 901489 |
| M. Eisner | |
| (613) 957-2138 |
October 23, 1990
Dear Sir:
Re: Principal Residence Exemption
This is in reply to your letter of June 22, 1990 in which you asked for a ruling on whether a gain on the sale of a property owned by a particular taxpayer would qualify as a gain from the disposition of a principal residence.
As indicated to you by telephone, we are unable to provide you with the requested ruling, since it would require an examination of all of the relevant facts. Should you wish to pursue this question, we suggest you contact your client's local District Taxation office. However, we can offer some general comments on your question.
As we understand it, the taxpayer in question purchased a house from a relative in 1971. At the time of the purchase, the house contained two apartments. The taxpayer lived in the apartment on the second floor, while the apartment on the first floor has been rented since 1971 to a tenant. Although the rent charged in respect of the first floor apartment exceeded deductible expenses, it was below the fair rental value of the apartment. No capital cost allowance was ever claimed by the taxpayer.
In the above circumstances, it appears evident that the property in question was a duplex. In these cases, the gain on the sale of the rented unit would be treated as a capital gain, while the gain on the sale of the unit occupied by the taxpayer would be eligible for the principal residence exemption. The gain on the rented unit would, of course, be eligible for the capital gains deduction.
Enclosed is a copy of Interpretation Bulletin IT-120R3 which discusses the principal residence exemption in detail. We hope the enclosed bulletin and the above comments are of assistance to you and your client.
Yours truly,
for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
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