An individual owns a chalet that is personally occupied for six months of the year (May to October) and is rented out to others for the remaining six months of the year. It is suggested that “technically” the chalet undergoes a change in use both in May when the individual begins to live in it, and in November when the individual begins to rent it out again.
If the individual does not make an election under ss. 45(2) and (3), is there a deemed disposition at FMV each time there is such a change in use? CRA responded:
[W]here a property has, since its acquisition by the taxpayer, been regularly used partly for the purpose of earning income and partly for another purpose, there will be no change in the use of the property for the purposes of section 45 by the mere fact that it is rented out from year to year in the same ratio as between the use regularly made of it for the purpose of earning income and the use ordinarily made of it for another purpose. …
As indicated in paragraph 2.58 of … S1-F3-C2 … paragraph 45(1)(c) applies where the partial change in use of the property is substantial and of a more permanent nature.