An individual held a triplex equally with his father in undivided co-ownership and also lived in one of the equally sized units as his principal residence. On a subsequent sale by them of the triplex, the individual realized a taxable capital gain of $90,000 on his portion (50% of the triplex) before taking the principal residence deduction into account. How is that deduction computed? In finding that the individual’s net taxable capital gain might be $30,000, CRA stated:
[T]he allocation does not necessarily have to be on the basis of floor area. Consideration should also be given to any factors which could have an effect on the relative value of any of the units in the building.
Assuming that the value of the three housing units is essentially the same and that the agreements between the individual and his father regarding the use of the building support such a conclusion, we could accept that the value of the individual’s undivided share of the triplex is attributable as to 2/3 for the housing unit of housing used by him as principal residence and as to 1/3 to the remainder of the triplex.