An individual incurs qualifying renovation expenditures to create a secondary unit (Unit B) to house a qualifying individual. When the work is completed in 2024, the secondary unit represents 20% of the area of the entire building (consisting of Unit A, occupied by the individual, and Unit B, occupied by the qualifying individual). Will 100% of the building still qualify for the principal residence exemption?
CRA indicated:
An immovable is normally considered to be a single property unless it is legally subdivided into two or more separate properties. An immovable may nevertheless include one or more housing units for the purposes of the principal residence exemption.
Since Unit B was a secondary dwelling unit that was ordinarily inhabited separately from Unit A, the taxpayer could only designate one of the two units as a principal residence, provided that the other conditions were met.