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D.Y. Dalphy (613) 957-2134
August 5, 1986
Dear Sirs:
This is in reply to your letter of May 27, 1986 regarding the meaning of the term "property" as it is used in subsection 40(2) of the Income Tax Act (the "Act").
In our opinion, whether a house and the land upon which it is built are viewed as one property or two properties is a question of fact. At common law, articles affixed to land even slightly are to be considered a part of the land unless the circumstances are such to show that they were intended to continue as chattels and, as between vendor and purchasor, it appears that a building is part of the land, whether or not it is affixed to the soil.
Further, the definition of "principal residence" in paragraph 54(g) of the Act provides:
"(v) for the purposes of this paragraph the principal residence of a taxpayer for a taxation year shall be deemed to include, except where the property consists of a share of the capital stock of a co-operative housing corporation, the land subjacent to the housing unit and such portion of any immediately contiguous land as may reasonably be regarded as contributing to the taxpayer's use and enjoyment of the housing unit as a residence, except that where the total area of the subjacent land and of that portion exceeds 1/2 hectare, the excess shall be deemed not to have contributed to the individual's use and enjoyment of the housing unit as a residence unless the taxpayer establishes that it was necessary to such use and enjoyment,".
Accordingly, we are of the view that the formula provided by paragraph 40(2)(b) of the Act and described in paragraph 20 of Interpretation Bulletin IT-120R3 applies to both the land and housing unit forming the "principal residence".
We hope these comments will be of assistance.
Yours truly,
for Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch