| 921457 | |
| 24(1) | A. Humenuk |
| (613) 957-2134 |
19(1)
June 23, 1992
Dear Sirs:
Re: Principal Residence Exemption
We are replying to your letter of May 7, 1992, concerning subparagraph 54(g)(v) of the Act and the parcel of land which is in excess of one-half hectare and is contiguous to an individual's principal residence.
You submitted diagrams describing the shape of two typical lots, each in excess of one-half hectare, and the location of the houses upon each. You have asked whether the whole of each lot would qualify for the principal residence exemption on the basis that the land is necessary for the use and enjoyment of the principal residence. You have also asked whether it would make a difference if the owner of the property constructed the house thereby deciding the location upon the lot for the residence.
It is a question of fact as to whether land in excess of one-half hectare is necessary for the use and enjoyment of a principal residence and it is incumbent upon a taxpayer wishing to claim land in excess of one-half hectare as part of his or her principal residence to establish, by means of the particular facts relating to that property, that the excess land is necessary for the use and enjoyment of that residence.
Thus, while we cannot provide a definitive reply which would apply to any particular property, we offer the following comments which may be of assistance to you when considering a particular fact situation.
In the examples provided, you indicate that the taxpayer could not obtain severance or subdivision of the major part of the land due to local by-laws and zoning restrictions. Where the municipal or provincial laws in effect at the time the taxpayer acquired the property require that residential lots be in excess of 1/2 hectare, the land area comprising the minimum residential lot size may be considered as part of the principal residence, subject to the comments in paragraph 14 of Interpretation Bulletin IT-120R3 "Principal Residence". If on the other hand your comments concerning severance restrictions were intended to indicate that, while the property was capable of subdivision, it could not necessarily be subdivided in the manner shown in your diagrams, then the comments in IT-120R3 on zoning restrictions may not be applicable.
In one of your examples, you indicate that the house is set back at the farthest end of the lot from the only public road and that a long straight private driveway connects the house to the road in such a manner as to require more than one-half hectare in order to gain access to the house from the public road. As stated in paragraph 12 of IT-120R3, such a fact would likely indicate that the land in excess of one-half hectare was necessary for the use and enjoyment of the residence. Furthermore, the fact that the individual had constructed the residence would not, in our view, have a bearing on whether the land was necessary for the use and enjoyment thereof.
In your second example, the land in excess of one-half hectare is situated on the opposite side of the residence from the public road and the taxpayer is unable to use that portion of the land for anything other than the personal use and enjoyment of the residence. In our view, the fact that the taxpayer does not have an alternate use for a particular portion of land does not mean that the land is necessary for the use and enjoyment of the residence situated on that particular lot. The emphasis is not on what the land is used for but rather on whether the land is necessary for the use and enjoyment of the principal residence. Based on the information given in your second example, it is unlikely that such excess land would be considered necessary for the use and enjoyment of the principal residence.
Notwithstanding our comments above, we would like to re-emphasize that the wording of subparagraph 54(g)(v) of the Act clearly places the onus upon a taxpayer wishing to claim land in excess of one-half hectare as a principal residence to show how such land was necessary for the use and enjoyment thereof. Thus, while the question of who constructed the residence would not have a bearing on whether the contiguous land in excess of one-half hectare would be considered as part of the principal residence, it is our view that a taxpayer could not increase the amount of land available as a principal residence solely by the judicious placement of the residence upon the property.
We trust our comments will be of assistance to you.
Yours truly,
J.A. Szeszyckifor DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch