C. Kauppinen (613) 995-0051
February 28, 1986
Dear XXXX
This is in reply to your letter dated February 12, 1986 concerning the Availability of the principal residence exemption to the capital beneficiary of a pre-1972 trust.
The facts of the situation are as follows:
XXXX
As requested, we confirm that, in our opinion, if the subject residence is transferred to the wife in satisfaction of her capital interest in the trust and she then sells it to a third party after May 9, 1985, subsection 107(2) would apply, subsection 107(4) would not apply, and subsection 40(7) would apply with the result that the trust's cost base would flow through to the wife and the principal residence exemption would apply to her because she has lived in the property throughout with the result that, by virtue of subsection 40(7), she will be deemed to have owned the residence for purposes of paragraph 40(2)(b) and 54(g).
The above is not an advance income tax ruling. It is our best interpretation of the law as it applies generally. It may, however, not always be appropriate in the circumstances of a particular case and, as stated in paragraph 24 of Information Circular 70-6R, it is not binding on this Department.
Yours truly,
for Director Financial Industries Division Rulings Directorate Legislative and Intergovernmental Affairs Branch