| 24(1) | 901097 |
| A. Humenuk | |
| (613) 957-2135 | |
| Attention: 19(1) | EACC9318 |
August 14, 1990
Dear Sirs:
Re: Subdivision and Sale of Land Contiguous to a Principal Residence
We are replying to your letter of June 8, 1990, concerning the interpretation of paragraphs 54(g) and 40(2)(b) of the Income Tax Act.
You describe a situation where a taxpayer subdivides and disposes of land contiguous to his or her principal residence. You have asked for confirmation that the disposition of subdivided lots that, in total, do not exceed a half-hectare, provided they were contiguous with the principal residence, would be considered to be a disposition of a principal residence for the purposes of paragraph 54(g) of the Act.
In your view, the sale of all or part of contiguous land within one-half hectare of a principal residence would be considered to be a sale of a principal residence.
Our Comments
In our view, it is not the size of the contiguous property disposed of that matters in determining whether paragraphs 54(g) and 40(2)(g) of the Act applies. Rather, it is the size of the entire property on which the housing unit (building) is situated that is determinative.
Where the housing unit is situated on a parcel of land that is less than one-half hectare in total, the portion of the land disposed of could be designated as a principal residence provided that the entire property was otherwise eligible to be designated as a principal residence for all the years it was owned by the taxpayer.
Where the housing unit is situated on a parcel of land that exceeds one-half hectare, the portion of land disposed of would not be eligible for the principal residence designation unless it was disposed of by expropriation or by the granting of an easement (as stated in paragraph 15 of Interpretation Bulletin IT-120R3 entitled "Principal Residence") or the residence was no longer suitable for habitation (as stated in paragraph 13 of the same bulletin) and it was otherwise eligible to be so designated.
We trust our comments will be of assistance to you.
Yours truly,
for DirectorBusiness and General DivisionRulings DirectorateLegislative and IntergovernmentalAffairs Branch